PURCHASE AND SALE AGREEMENT by and Among Cinergy Capital & Trading, Inc., as Seller, and Fortis Bank S.A./N.V., as Buyer Dated as of June 26, 2006

Exhibit 10.1

EXECUTION VERSION

 

 

by and among

Cinergy Capital &Trading, Inc.,

as Seller,

and

Fortis BankS.A./N.V.,

as Buyer

dated as of June 26,2006

 

 



TABLE OFCONTENTS

 

ARTICLE I

 

 

 

 

 

DEFINITIONS AND CONSTRUCTION

 

 

 

 

 

 

 

 

 

1.1

 

Definitions

 

1

 

1.2

 

Rules of Construction

 

15

 

 

 

 

 

 

 

 

 

ARTICLE II

 

 

 

 

 

PURCHASE PRICE; DELIVERY OF DOCUMENTS

 

 

 

 

 

 

 

 

 

2.1

 

Purchase and Sale

 

16

 

2.2

 

Purchase Price

 

16

 

2.3

 

Deliverables on the Signing Date

 

16

 

2.4

 

Closing

 

17

 

2.5

 

Closing Deliveries by Seller to Buyer

 

17

 

2.6

 

Closing Deliveries by Buyer to Seller

 

19

 

2.7

 

Adjustments to MTM Value and Net Working Capital

 

20

 

2.8

 

Allocation of Purchase Price

 

22

 

2.9

 

True Up for Deferred Incentive Plan Amount

 

22

 

 

 

 

 

 

 

 

 

ARTICLE III

 

 

 

 

 

REPRESENTATIONS AND WARRANTIES REGARDING SELLER

 

 

 

 

 

 

 

 

 

3.1

 

Organization

 

23

 

3.2

 

Authority

 

23

 

3.3

 

No Conflicts

 

23

 

3.4

 

Capitalization

 

24

 

3.5

 

Legal Proceedings

 

24

 

3.6

 

Brokers’ Fees

 

24

 

 

 

 

 

 

 

 

 

ARTICLE IV

 

 

 

 

 

REPRESENTATIONS AND WARRANTIES REGARDING

 

 

 

 

 

THE COMPANIES AND CG&E

 

 

 

 

 

 

 

 

 

4.1

 

Organization

 

24

 

4.2

 

No Conflict

 

25

 

4.3

 

Capitalization

 

25

 

4.4

 

Legal Proceedings

 

26

 

4.5

 

Compliance with Laws

 

26

 

4.6

 

No Default or Termination

 

26

 

4.7

 

Market Based Rate Authority

 

26

 

4.8

 

Taxes

 

26

 

4.9

 

Real Property

 

28

 

4.10

 

Insurance

 

28

 

4.11

 

Intellectual Property and Software

 

28

 

4.12

 

Brokers’ Fees

 

30

 

4.13

 

Employees and Labor Matters

 

30

 

4.14

 

Employee Benefits

 

31

 

4.15

 

Liabilities

 

31

 

4.16

 

Other Assets

 

31

 

4.17

 

Licenses

 

32

 

4.18

 

Financial Information

 

32

 

 



 

4.19

 

No Adverse Changes

 

32

 

4.20

 

Contracts and Commitments

 

32

 

4.21

 

No Conflicting Contracts

 

33

 

4.22

 

Trading

 

33

 

4.23

 

TRS Agreement

 

33

 

 

 

 

 

 

 

 

 

ARTICLE V

 

 

 

 

 

REPRESENTATIONS AND WARRANTIES OF BUYER

 

 

 

 

 

 

 

 

 

5.1

 

Organization

 

34

 

5.2

 

Authority

 

34

 

5.3

 

No Conflicts

 

34

 

5.4

 

Legal Proceedings

 

35

 

5.5

 

Brokers’ Fees

 

35

 

5.6

 

Acquisition as Investment

 

35

 

5.7

 

Financial Resources

 

35

 

5.8

 

No Conflicting Contracts

 

35

 

5.9

 

Opportunity for Independent Investigation

 

35

 

5.10

 

Federal Reserve Board Filing

 

36

 

 

 

 

 

 

 

 

 

ARTICLE VI

 

 

 

 

 

COVENANTS

 

 

 

 

 

 

 

 

 

6.1

 

Novation and Assignment of CG&E Transactions

 

36

 

6.2

 

Regulatory and Other Approvals

 

38

 

6.3

 

Access of Buyer and Seller

 

39

 

6.4

 

Certain Restrictions

 

40

 

6.5

 

Migration Services

 

42

 

6.6

 

Use of Certain Names

 

43

 

6.7

 

Support Obligations

 

43

 

6.8

 

Excluded Items

 

46

 

6.9

 

Employee and Benefit Matters

 

46

 

6.10

 

Termination of Certain Services and Contracts

 

53

 

6.11

 

Intercompany Indebtedness; Distributions

 

53

 

6.12

 

Transfer Taxes

 

53

 

6.13

 

Transition Services Arrangements

 

54

 

6.14

 

Tax Matters

 

54

 

6.15

 

Affiliate Contracts

 

57

 

6.16

 

Further Assurances

 

57

 

6.17

 

Periodic Reports

 

57

 

 

 

 

 

 

 

 

 

ARTICLE VII

 

 

 

 

 

BUYER’S CONDITIONS TO CLOSING

 

 

 

 

 

 

 

 

 

7.1

 

Representations and Warranties

 

57

 

7.2

 

Performance

 

58

 

7.3

 

Officer’s Certificate

 

58

 

7.4

 

Orders and Laws

 

58

 

7.5

 

Buyer Approvals

 

58

 

7.6

 

Casualty

 

58

 

 

 

 

 

 

 

 



 

 

ARTICLE VIII

 

 

 

 

 

SELLER’S CONDITIONS TO CLOSING

 

 

 

 

 

 

 

 

 

8.1

 

Representations and Warranties

 

58

 

8.2

 

Performance

 

58

 

8.3

 

Officer’s Certificate

 

58

 

8.4

 

Orders and Laws

 

59

 

8.5

 

Seller Approvals

 

59

 

 

 

 

 

 

 

 

 

ARTICLE IX

 

 

 

 

 

TERMINATION

 

 

 

 

 

 

 

 

 

9.1

 

Termination

 

59

 

9.2

 

Effect of Termination

 

59

 

 

 

 

 

 

 

 

 

ARTICLE X

 

 

 

 

 

INDEMNIFICATION, LIMITATIONS OF LIABILITY, WAIVERS AND ARBITRATION

 

 

 

 

 

 

 

 

 

10.1

 

Indemnification

 

60

 

10.2

 

Limitations of Liability

 

61

 

10.3

 

Indirect Claims

 

63

 

10.4

 

Waiver of Other Representations

 

63

 

10.5

 

Waiver of Remedies

 

64

 

10.6

 

Procedure with Respect to Third-Party Claims

 

64

 

10.7

 

Tax Treatment of Indemnity Payment

 

65

 

 

 

 

 

 

 

 

 

ARTICLE XI

 

 

 

 

 

MISCELLANEOUS

 

 

 

 

 

 

 

 

 

11.1

 

Notices

 

66

 

11.2

 

Entire Agreement

 

66

 

11.3

 

Expenses

 

67

 

11.4

 

Disclosure

 

67

 

11.5

 

Waiver

 

67

 

11.6

 

Amendment

 

67

 

11.7

 

No Third Party Beneficiary

 

67

 

11.8

 

Assignment; Binding Effect

 

67

 

11.9

 

Headings

 

67

 

11.10

 

Invalid Provisions

 

67

 

11.11

 

Acknowledgment by Buyer

 

68

 

11.12

 

Publicity

 

68

 

11.13

 

Counterparts; Facsimile

 

68

 

11.14

 

Governing Law; Venue; and Jurisdiction

 

68

 

11.15

 

Attorneys’ Fees

 

68

 

 



 

EXHIBITS

Exhibit A-1

Form of Company Assignment Agreement – CMT

Exhibit A-2

Form of Company Assignment Agreement – CCI

Exhibit B

Form of Assignment and Assumption Agreement

Exhibit C

Form of TRS Agreement

Exhibit D

Form of Services Agreement

Exhibit E

Form of CG&E Novation Agreement

Exhibit F

Form of CG&E Assignment Agreement

Exhibit G

Form of CG&E Novation/Assignment Progress Report

Exhibit H

Form of Transition Services Agreement

Exhibit I

Form of Seller Guaranty

Exhibit J

Form of Assignment and Bill of Sale Agreement

Exhibit K

Form of Software and Intellectual Property License

Exhibit L

Specified Financial Statements

 

SCHEDULES

1.1-AC

Affiliate Contracts

1.1-CC

Cornerstone Contracts

1.1-KS

Seller Knowledge

1.1-KB

Buyer Knowledge

1.1-NWC

Sample NWC Calculation

2.3(b)

Signing Date Transactions

2.3(c)

Support Obligations on Signing Date

2.5(d)

Closing Date Transactions

2.5(e)

Support Obligations on Closing Date

2.8

Purchase Price Allocation

3.3(c)

Seller Approvals

3.5

Legal Proceedings of Seller or Parent Companies

4.2

Company Consents

4.3

Capitalization of Companies

4.4

Legal Proceedings

4.6

Notice of Defaults or Termination

4.7

Market Based Rate Authority

4.8

Taxes

4.9(b)

Real Property Leases

4.10

Insurance

4.11(a)

Excepted Intellectual Property

4.11(b)

Registered Intellectual Property

4.11(c)

Proprietary Applications

4.11(e)

Infringement and Misappropriation Claims

4.11(f)

Transferred Equipment

4.11(g)

Material Software Licenses

4.13

Canadian Employees

4.14

Canadian Employee Benefit Plans

4.15

Liabilities

4.19

Adverse Changes

4.20

Material Contracts

 



 

5.3

Buyer Approvals

6.4

Exceptions to Certain Restrictions

6.5

Migration Services

6.8

Excluded Items

6.10

Terminated Contracts

 

 











PURCHASE ANDSALE AGREEMENT

This Purchaseand Sale Agreement (this “Agreement”)dated as of June 26, 2006 (“Signing Date”) is made and entered into byand between Cinergy Capital & Trading, Inc., an Indianacorporation (“Seller”) and Fortis BankS.A./N.V., a Belgian corporation with its registered office at Warandeberg 3,1000 Brussels, RPM/RPR 0403.199.702 Buyer”).

RECITALS

WHEREAS, Sellerdesires to sell or cause the Parent Companies to sell to Buyer, and Buyerdesires to purchase from Seller and the Parent Companies, (i) 100% of thepartnership interests in Cinergy Marketing & Trading, LP, a Delawarelimited partnership (“CMT”),and (ii) 100% of the outstanding shares of Cinergy Canada, Inc., anAlberta corporation (“CCI”)(such partnership interests in CMT and shares in CCI being collectively the “Purchased Interests”),all on the terms and subject to the conditions set forth herein.

WHEREAS, TheCincinnati Gas & Electric Company, an Ohio Corporation (d/b/a DukeEnergy Ohio, Inc.) (together with its successors and permitted assigns, “CG&E”), CMT andCCI, have entered into and may continue to enter into transactions for thepurchase and sale of electric energy and capacity, other commodities and/orrelated products, including transactions providing for physical delivery and/ortransactions providing for financial settlement (“Marketing and Trading Transactions”);

WHEREAS, as ofthe Closing Date, upon the terms and subject to the conditions set forth inthis Agreement, the TRS Agreement and the Services Agreement (each as definedbelow), CG&E desires to provide to CMT, and CMT desires to assume fromCG&E, the economic equivalent of the benefits and burdens associated withcertain Marketing and Trading Transactions entered into by CG&E with the intentto put CMT and CG&E in substantially the same economic position as if suchMarketing and Trading Transactions had been novated or assigned from CG&Eto CMT as of the Closing Date; and

WHEREAS, CMT,CG&E and Buyer desire to effect the novation or assignment of the CG&ETransactions (as defined below) from CG&E to CMT upon the terms and subjectto the conditions set forth in this Agreement.

STATEMENT OFAGREEMENT

Now, therefore,in consideration of the premises and the mutual representations, warranties,covenants and agreements in this Agreement, and for other good and valuableconsideration, the receipt and sufficiency of which are hereby acknowledged,the Parties agree as follows:

ARTICLEI
DEFINITIONS AND CONSTRUCTION

                1.1          Definitions. As used in this Agreement, the following capitalized termshave the meanings set forth below:

“1933 Act” has the meaning given toit in Section 5.6.

1



“ADSP” hasthe meaning given to it in Section 6.14(a).

“AGUB” has the meaning given to it inSection 6.14(a).

“Affiliate” means any Person thatdirectly, or indirectly through one or more intermediaries, controls, iscontrolled by or is under common control with the Person specified. Forpurposes of this definition, control of a Person means the power, direct orindirect, to direct or cause the direction of the management and policies ofsuch Person whether through ownership of voting securities or ownershipinterests, by contract or otherwise, and specifically with respect to acorporation, partnership or limited liability company, also includes direct orindirect ownership of more than 50% of the voting securities in suchcorporation or of the voting interest in a partnership or limited liabilitycompany.

“Affiliate Contracts”means, collectively, those Contracts listed on Schedule 1.1-AC.

“Agreement” has the meaning given to it in theintroduction to this Agreement.

“Allocation Schedule”has the meaning given to it in Section 6.14(a).

“Ancillary Agreements”means the TRS Agreement, the Services Agreement, each Company AssignmentAgreement, each Assignment and Assumption Agreement, each CG&E NovationAgreement, each CG&E Assignment Agreement, the Transition ServicesAgreement, the Software and Intellectual Property License, the Seller Guaranty,the Assignment and Bill of Sale Agreement and the TRS Guaranty.

“Assigned Contracts”means, collectively, each Affiliate Contract, other than a Terminated Contract,for which the applicable Counterparty has consented to (or for which no consentis required for) the assignment thereof by the Assignor to the Assignee ascontemplated by Section 2.5(b).

“Assignee” has the meaning given to it in Section 2.5(b).

“Assignment and Assumption Agreement”has the meaning given to it in Section 2.5(b).

“Assignment and Bill of SaleAgreement” has the meaning given to it in Section 2.5(j).

“Assignor” has the meaning given to it in Section 2.5(b).

“Available Employees” has the meaninggiven to it in Section 6.9(a).

“Bankruptcy Code”means title 11 of the United States Code, 11 U.S.C. 101, et seq.

“Base Purchase Price”has the meaning given to it in Section 2.2(a).

“Benefit Plan” means (a) each “employee benefitplan,” as such term is defined in Section 3(3) of ERISA, (b) eachplan that would be an “employee benefit plan”, as such term is defined in Section 3(3) ofERISA, if it was subject to ERISA, such as foreign plans and plans for

2



directors,(c) each stock bonus, stock ownership, stock option, stock purchase, stockappreciation rights, phantom stock, or other stock plan (whether qualified ornonqualified), and (d) each bonus or incentive compensation plan,provided, however, that the term Benefit Plan shall not refer to any of theCanadian Employee Benefit Plans.

“Business Day” means a day other than Saturday, Sunday orany day on which banks located in the State of New York or the State of Texasare authorized or obligated to close.

“Buyer” has the meaning given to it in the introductionto this Agreement.

“Buyer Approvals” has the meaning given to it in Section 5.3(c).

“Buyer Indemnified Parties”has the meaning given to it in Section 10.1(a).

“Canadian Employee Benefit Plans”means all plans, arrangements, agreements, programs, policies, practices orundertakings, whether oral or written, formal or informal, funded or unfunded,insured or uninsured, registered or unregistered to which CCI is a party orbound or in which the Canadian Employees participate or under which CCI has, orwill have, any liability or contingent liability, or pursuant to which paymentsare made, or benefits are provided to, or an entitlement to payments orbenefits may arise with respect to any of the Canadian Employees or formerCanadian Employees, excluding Statutory Plans.

“Canadian Employees”means those individuals employed by CCI as of the Closing Date.

“Canadian Tax Act”means the Income Tax Act (Canada), as amended.

“Capital Stock” means capital stock,partnership or membership interests or units (whether general or limited), andany other interest or participation that confers on a person the right toreceive a share of the profits and losses of, or distribution of assets of, theissuing entity.

“CCI” has the meaning given to it in the recitals to thisAgreement.

“CG&E” has the meaning given to it in the recitals tothis Agreement.

“CG&E Assignment Agreement” means eachAssignment and Assumption Agreement substantially in the form of Exhibit Fexecuted and delivered with respect to a CG&E Transaction pursuant to Section 6.1.

“CG&E Novation Agreement” means each Novation Agreementsubstantially in the form of Exhibit E executed and delivered with respectto a CG&E Transaction pursuant to Section 6.1.

“CG&E Transactions”means the Marketing and Trading Transactions entered into by CG&E (togetherwith the Contracts evidencing the terms and conditions of such Marketing andTrading Transactions) that will be subject to the TRS Agreement as of theClosing Date. As of the Signing Date, the CG&E Transactions are thoseMarketing and Trading Transactions set forth on Schedule 2.3(b) tothe extent having settlement and/or delivery dates on or after

3



September 1,2006 and to which CG&E is a party, and, as of the Closing Date, theCG&E Transactions are those Marketing and Trading Transactions set forth onSchedule 2.5(d) to the extent having settlement and/or deliverydates on or after the later of the Closing Date and September 1, 2006 towhich CG&E is a party. Forpurposes of clarification, upon the novation or assignment of a CG&ETransaction from CG&E to CMT, it shall no longer be a CG&E Transaction.

“CG&E Transferred Percentage”has the meaning given to it in Section 6.1(d).

“Charter Documents” means, with respect to any Person,the articles of incorporation, continuance, amalgamation or organization,memorandum or association, by-laws, the limited partnership agreement, thepartnership agreement or the limited liability company agreement, or such otherorganizational documents of such Person which establish the legal personalityof such Person.

“Claim” means anydemand, claim, action, investigation, legal proceeding (whether at law or inequity) or arbitration.

“Claiming Party” hasthe meaning given to it in Section 10.6(a).

“Closing” means the closing of the transactionscontemplated by this Agreement, as provided for in Section 2.4.

“Closing Date” means the date on which Closing occurs.

“Closing Date Transactions” means those Marketing andTrading Transactions of CCI, CMT and CG&E as of the Closing Date set forthon Schedule 2.5(d).

“CMT” has the meaning given to it in the recitals to thisAgreement.

“Code” means the Internal RevenueCode of 1986, as amended, and the U.S. Treasury Regulations promulgatedthereunder.

“Companies” means, collectively, CMT andCCI, and each of CMT and CCI may be referred to as a “Company”.

“Company Assignment Agreement” has the meaning given toit in Section 2.5(a).

“Company Consents” hasthe meaning given to it in Section 4.2(b).

“Competition Act (Canada)” means theCompetition Act (Canada) R.S.C. 1985, c.C-34 and the regulationspromulgated thereunder, as amended.

“Confidentiality Agreement”means that certain Confidentiality Agreement between Fortis Brussels S.A./N.V.,acting in its own name and in the name of its subsidiaries, and Duke EnergyCorporation dated as of April 10, 2006.

“Continued Employee” has the meaning set forth in Section 6.9(b).

4



“Continuing Support Obligation” has the meaning given to it inSection 6.7(d).

“Contract” means any legally binding written agreement.

“Cornerstone Contracts” means those contracts set forthon Schedule 1.1-CC.

“Counterparty” means,with respect to any Contract, each party to such Contract (other than Sellerand its Affiliates).

“Credit Rating” means, with respect to any Person, eachrating given to such Person’s long-term unsecured debt obligations by S&Por Moody’s, as applicable.

“Credit Support” meansall cash, guaranties, letters of credit, surety bonds, treasury securities, andother credit support posted or provided by a Person in support of theobligations of any Person.

“Credit Support Payment” means an amount (which may bepositive or negative), calculated using the applicable values as of the end ofthe Business Day immediately preceding the Closing Date (the “CS Calculation Date”),equal to the difference between (a) the amount of Credit Support (otherthan in the form of guaranties) then posted by a Duke Credit Support Provider (i) onbehalf of either Company, (ii) with respect to any CG&E Transaction,or (iii) with respect to any Affiliate Contracts being assigned to aCompany as of the Closing Date, in each case as of the CS Calculation Date minus (b) the amount of CreditSupport in the form of cash collateral then held by a Non-Company Affiliate (i) onbehalf of either Company, (ii) with respect to any CG&E Transaction or(iii) with respect to any Affiliate Contracts being assigned to a Companyas of the Closing Date, in each case calculated as of the CS Calculation Date; provided that (A) the Credit Supportdescribed in clause (a) of this definition shall not include CreditSupport in the form of a letter of credit posted by a Duke Credit SupportProvider to the extent the applicable Counterparty and the beneficiary of suchletter of credit have agreed in writing, effective as of or prior to Closing,to (1) release as of Closing the applicable Duke Credit Support Providerfrom all obligations under such letter of credit, and (2) terminate as ofClosing such letter of credit and (B) the Credit Support described inclause (a)(i) and clause (b)(i) of this definition shall exclude anyCredit Support that is included in the calculation of Net Working Capital.

“Credit Support Payment Estimate” has the meaning givento it in Section 2.6.

“Daily Operating Reports”means the operating reports prepared by the Companies in the ordinary course oftheir business consistent with past practice in a format similar to theoperating reports contained in the Intralinks data room in connection with thetransactions contemplated by this Agreement.

“Data” means all the available data in digitalformat that is used in the operations and business of the Companies (and theCG&E Transactions) as currently conducted, including any Transaction datain digital format.

“Deductible Amount” has the meaning given to it in Section 10.2(c).

5



“Deferred Incentive Plan Amount”means (i) the aggregate amount (including, for this purpose, an amountequal to the employers’ share of FICA and FUTA Taxes with respect thereto tothe extent not paid at or prior to Closing by Seller or an Affiliate of Seller)of 2005 deferred bonuses payable in 2007 under the Incentive Plan to theAvailable Employees as described under the heading “Deferred 2005 Bonus Amounts”in the information delivered by Seller to Buyer on the Signing Date pursuant tothe second sentence of Section 6.9(n) and (ii) the aggregateamounts (including, for this purpose, amounts equal to the employers’ share ofFICA and FUTA Taxes with respect thereto to the extent not paid at or prior toClosing by Seller or an Affiliate of Seller) payable under letter agreementsand similar written commitments and arrangements between Available Employeesand Seller and Non-Company Affiliates of Seller (including sign-on bonuses andguaranteed payment amounts) as described under the heading “Other DeferredAmounts” in the information delivered by Seller to Buyer on the Signing Datepursuant to the last sentence of Section 6.9(n).

“Disagreement” has themeaning given to it in Section 2.7(c).

“Dispute Notice” hasthe meaning given to it in Section 2.7(a).

“Duke Credit Support Providers”means Seller or any Non-Company Affiliates (including Cinergy Corp. and DukeCapital LLC) that provide Credit Support (a) on behalf of either Company(including with respect to any Marketing and Trading Contract of such Company),(b) with respect to any CG&E Transaction or (c) with respect toany Affiliate Contract.

“Equipment” means thecomputers and related equipment, including central processing units and otherprocessors (e.g., microprocessors and embedded processors), controllers,modems, communications and telecommunications equipment (e.g., voice, data andvideo), cables, storage devices, printers, terminals, other peripherals andinput and output devices and other tangible mechanical and electronic equipmentintended for the input, output, storage, communication and retrieval ofinformation and data,

“ERISA” means the Employee RetirementIncome Security Act of 1974, as amended.

“ERISA Affiliate” means any entity,trade or business that is a member of a group described in Section 414(b),(c), (m) or (o) of the Code or Section 4001(b)(1) of ERISAthat includes Seller or the Companies, or that is a member of the same “controlledgroup” as Seller or the Companies pursuant to Section 4001(a)(14) ofERISA; provided, however, thatthe Companies shall not be considered to be ERISA Affiliates from and after theClosing.

“Excluded Items” has the meaning given to it in Section 6.8.

“Federal Reserve Board”means the Board of Governors of the Federal Reserve System.

“FERC” means the Federal EnergyRegulatory Commission.

“FICA” means theFederal Insurance Contributions Act, as amended, and the regulationspromulgated thereunder.

6



“FPA” means the Federal Power Act.

“FUTA” means theFederal Unemployment Tax Act, as amended, and the regulations promulgatedthereunder.

“GAAP” means generally accepted accounting principles inthe United States of America, applied on a consistent basis.

“Governmental Authority” means any applicable federal,state, provincial, municipal, local or other governmental authority, agency,board, bureau, commission, court, department, official or other instrumentalityin the United States or Canada.

“Hire Date” has themeaning given to it in Section 6.9(b).

“Hired Employee” hasthe meaning given to it in Section 6.9(b).

“HSR Act” means theHart Scott Rodino Antitrust Improvement Act of 1976.

“Incentive Plan Payment Amount”means the aggregate amount payable by Seller (or a Non-Company Affiliate ofSeller) to Hired Employees under the Incentive Plan for the portion of fiscalyear 2006 of the Companies ending prior to Closing as determined in good faithby the Seller.

“Incentive Plan” means the CinergyCorp. Commercial Business Unit Annual Incentive Plan.

“Indemnified Parties”has the meaning given to it in Section 10.1(b).

“Independent Accountant”means (a) Ernst & Young LLP and its successors, or (b) ifErnst & Young LLP is (i) unable or unwilling to serve in suchcapacity or (ii) engaged by either Seller, Buyer or their respectiveAffiliates as its accountingauditor during the two-year period preceding the date of the selection of anIndependent Auditor under Section 2.7, such other independent accountingfirm of nationally recognized standing that is mutually selected by Buyer andSeller and has not been engaged to act as an accounting auditor for Buyer,Seller or their respective Affiliates during the two-year period preceding suchselection.

“Intellectual Property” means the following intellectualproperty, whether arising by statute or under common law: (a) copyrights,registrations and applications for registration thereof, (b) trademarks,service marks, trade names, slogans, domain names, logos, trade dress, andregistrations and applications for registrations thereof, (c) patents, aswell as any reissued and reexamined patents and extensions corresponding to thepatents, and any patent applications, as well as any related continuation,continuation in part and divisional applications and patents issuing therefromand (d) trade secrets and confidential information, including data, ideas,designs, concepts, compilations of information, methods, techniques,procedures, processes and other know-how, whether or not patentable.

“Interim Period” has the meaninggiven to it in Section 6.2.

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“Knowledge” when used with respect to Seller, means theactual knowledge of the individuals listed on Schedule 1.1-KS and,when used with respect to the Buyer, means the actual knowledge of theindividuals listed on Schedule 1.1-KB.

“Laws” means all laws, rules, regulations, ordinances,court orders of general application, and other pronouncements of generalapplication having the effect of law of any Governmental Authority.

“Letter of Credit”means an irrevocable, standby letter of credit issued by a commercial bank withCredit Ratings at least equal to the Required Rating, which shall (a) includecustomary terms and conditions (including terms and conditions substantiallysimilar to or more favorable than those in the Support Obligation which isbeing replaced or backstopped by such Letter of Credit), (b) containcustomary rights permitting the beneficiary of such Letter of Credit to drawupon such Letter of Credit upon any event or omission that would have allowedthe Support Obligation being replaced by such Letter of Credit to be drawn orcalled upon, including upon certification of any breach of the underlyingcontract if applicable, and (c) contain the right for the beneficiarythereof to draw on such Letter of Credit if such Letter of Credit has not beenrenewed or replaced at least thirty (30) days prior to the expiration thereof(or such lesser period as may be specified in the underlying contract to whichsuch Letter of Credit relates).

“Licensed Intellectual Property”meansIntellectual Property owned by Seller or any Non-Company Affiliate and that isused in the operations and business of the Companies (including the CG&ETransactions) as currently conducted, including Intellectual Property embodiedin the Proprietary Applications (in both source and object code form) and allRelated Documentation, but excluding Seller’s Marks, Excluded Items and theitems listed on Schedule 4.11(a).

“Lien” means any charge, purchase option, mortgage, pledge, deed of trust (or in thecase of CCI, any deemed or statutory trust), security interest, encumbrance orother lien of any kind.

“Loss” means any and all judgments, losses, liabilities,amounts paid in settlement, damages, fines, penalties, deficiencies, costs andexpenses (including interest, court costs, reasonable fees of attorneys,accountants and other experts or other reasonable expenses of litigation orother proceedings or of any claim, default or assessment) but in each case onlyto the extent such Losses are not covered by a payment from a third party or byinsurance, it being understood and agreed that the Indemnified Parties shalluse their commercially reasonable efforts to seek insurance and other third-partyrecoveries in respect of Losses to be indemnified hereunder. For all purposesin this Agreement the term “Losses” does notinclude any Non-reimbursable Damages.

“Management Reports”means the reports titled “Cinergy Performance Management Reporting (GasPortfolio Business Unit) EBIT” and/or “Cinergy Performance Management Reporting(Gas & Power Portfolio Business Unit) EBIT” relating to periods infiscal year 2005 and the portion of the fiscal year 2006 ended March 31,2006.

“Marketing and Trading Transaction” has the meaning givento it in the recitals to this Agreement.

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“Master Agreement” means forms ofmaster agreements or general terms and conditions as have been accepted by asignificant portion of the applicable market for trading the products orcommodities covered by such agreements or such general terms and conditions.

“Material Adverse Effect”means a material adverse effect, either individually or in the aggregate, on (a) thebusiness, financial condition, or results of operations of the Companies, theCG&E Transactions, and the Affiliate Contracts considering this clause (a) takenas a whole, as applicable to periods after Closing or (b) the consummationof the transactions contemplated by this Agreement; provided, however, that any effect arising from thefollowing shall not be considered when determining whether a Material AdverseEffect has occurred:  (i) any changegenerally applicable to the industry or market in which a Company or CG&Eoperates, (ii) any change in general political, regulatory or economicconditions, including the financial and securities markets and including anyacts of war or terrorist activities, (iii) any continuation of an adversetrend or condition, (iv) any change in any Laws, (v) the failure ofSeller or any Non-Company Affiliate to effect the assignment of any Contract toeither Company; (vi) any changes in the mark-to-market value of anyTransaction after the Signing Date, (vii) any changes in the generalmarket prices of commodities, including natural gas and electricity, (viii) anychange in the financial condition or results of operation of a Company orCG&E caused by the transactions contemplated by this Agreement, (ix) anyactions taken or omitted with the consent of Buyer or pursuant to or inaccordance with this Agreement, and (x) the announcement or pendency ofthe transactions contemplated by this Agreement.

“Material Contracts” has the meaninggiven to it in Section 4.20.

“Material Economic Terms” means, withrespect to any Closing Date Transaction and the Trading Contracts relatedthereto, the identity of the buyer and the seller, the commodity or product,the contract or notional quantity, the contract price, and, if applicable, theperiod of delivery and the delivery point(s), and, for a Closing DateTransaction involving an option, the option type, premium, strike price andexpiration date.

“Material Software Licenses” meansthe Contracts for the Software set forth on Schedule 4.11(g).

“Migration Plan” hasthe meaning given to it in Section 6.5.

“Migration Services”has the meaning given to it in Section 6.5.

“Moody’s” means Moody’sInvestors Services, Inc. and any successors thereto.

“MTM Estimate” meansSeller’s good faith estimate of the MTM Value of the Trading Book delivered inwriting to Buyer at least three (3) Business Days prior to Closing.

“MTM Sample Calculation” meansthe sample calculation as of June 7, 2006 of the MTM Value of the TradingBook delivered by Seller to Buyer on the Signing Date pursuant to Section 2.3(e).

“MTM Value of the Trading Book”means the mark-to-market value of the Closing Date Transactions calculatedas of the Closing Date based on the mid-market prices (net of reserves)

 

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determinedin a manner consistent with the past practices of the Companies and inaccordance with the methodology and sample calculation used to reflect the MTMValue of the Trading Book as of June 7, 2006 set forth on the MTM SampleCalculation.

“Net Working Capital”means (without duplication), the sum of the following calculations made with respectto each Company as of the Closing Date (expressed as a positive or negativenumber): the difference between (a) the total current assets of suchCompany (including any current assets associated with Credit Support providedwith respect to the Closing Date Transactions other than (x) in the formof a letter of credit or (y) with respect to the CG&E Transactions,but otherwise excluding any current assets expressly included in and anyreserves associated with the MTM Value of the Trading Book and/or theTransactions), minus (b) the total current liabilities of such Company(including any current liabilities associated with Credit Support provided withrespect to the Closing Date Transactions other than the CG&E Transactions,but otherwise excluding any current liabilities expressly included in and anyreserves associated with the MTM Value of the Trading Book and/or theTransactions); and in the case of clauses (a) and (b) above, (i) excluding(A) any Excluded Items, (B) any current income Tax asset or deferred income Tax asset or liabilityreflecting differences between the treatment of items for accounting and incomeTax purposes, or carryforwards (other than any deferred income Tax asset orliability (net of any valuation allowance) reflecting the MTM Value of theTrading Book with respect to any Transactions of CCI), and (C) anyliabilities associated with employee compensation, including accruals orreserves for employee incentive, bonus or retention payments (other thancurrent liabilities associated with employee compensation (other thanincentive, bonus or retention payments or similar payments) for employees ofCCI), (ii) measured as of the time immediatelyprior to the consummation of, and without giving effect to, the transactionscontemplated hereby (but after giving effect to any items contemplated to occuras of the Closing under Sections 6.10 and 6.11), (iii) determined inaccordance with the methodology and sample calculation used to reflect thecomponents of Net Working Capital as of March 31, 2006 set forth on Schedule1.1- NWC, (iv) otherwisedetermined in accordance with GAAP, (v) for purposes of clarification, anyaccount receivable or account payable relating to a Marketing and TradingTransaction of either Company (whether relating to (1) a Marketing andTrading Transaction of either Company that has been closed out or terminated asof Closing or (2) a Closing Date Transaction of either Company) shall be included in Net Working Capital, and (vi) without duplication of any mattersfor which Buyer has otherwise been compensated pursuant to this Agreement,whether through the calculation of, or any adjustment to, the Purchase Price orMTM Value of the Trading Book (including any adjustments thereto in accordancewith the MTM Sample Calculation), through the presence of accruals or reserves or otherwise.

“Non-Company Affiliate” means anyAffiliate of Seller, except for the Companies.

“Non-reimbursable Damages” has themeaning given to it in Section 10.5(b).

“NWC Estimate” means Seller’s good faithestimate of Net Working Capital delivered in writing to Buyer at least three (3) BusinessDays prior to the Closing.

“Omitted Counterparty Transaction”has the meaning given to it in Section 2.7(a).

 

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“Parent Companies”means, collectively, Cinergy Limited Holdings, LLC and Cinergy GeneralHoldings, LLC, together with their successors.

“Parties” means each of the parties that is a signatoryto this Agreement and, for purposes of Article X, shall include theparties that are signatories to the Software and Intellectual Property LicenseAgreement.

“Payment Date has themeaning given to it in Section 6.7(e).

“PermittedTax Liens”mean (i) Liens securing the payment of Taxes which are either notdelinquent or are being contested in good faith by appropriate proceedings and (ii) Liensfor current Taxes not yet due or payable.

“Person” means any natural person, corporation, generalpartnership, limited partnership, limited liability company, unlimitedliability corporation, joint venture, proprietorship, other businessorganization, trust, union, association or Governmental Authority.

“Pre-Closing Tax Period”means any Tax period ending on or before the Closing Date.

“Prevailing Party” hasthe meaning given to it in Section 2.7(c).

“Proceeding” means any complaint,lawsuit, action, suit, claim (including claim of a violation of Law) or otherproceeding at Law or in equity or order or ruling by any Governmental Authorityor arbitral tribunal.

“Proprietary Applications” meansthe Software that is owned by the Seller or the Non-Company Affiliates andlicensed to Buyer and its Affiliates pursuant to the Software and IntellectualProperty License Agreement.

“Purchase Price” has the meaning given to it in Section 2.2.

“Purchased Interests”has the meaning given to it in the recitals to this Agreement.

“Real Property Leases”has the meaning given to it in Section 4.9(b)

“Referral Date” hasthe meaning given to it in Section 2.7(c).

“Referral Notice” hasthe meaning given to it in Section 2.7(c).

“Registered Intellectual Property”has the meaning given to it in Section 4.11(b).

“Related Documentation”means, with respect to Software, all materials, documentation, specifications,technical manuals, user manuals, flow diagrams, file descriptions and otherinformation that describes the function and use of such Software, in each casethat is reasonably available.

“Representatives” means, as to any Person, its and itsAffiliates’ officers, directors, partners, members, employees, counsel,accountants, financial advisers and consultants.

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“RequiredISO/RTO Membership” means, with respect to any Transaction, any membership orparticipant status in any Independent System Operator, Regional TransmissionOrganization or similar organized market for sales of electric energy, capacityand ancillary services required for CMT to perform its obligations under suchTransaction.

“Required Rating” means a Credit Rating of at least “A-”from S&P and at least “A3” from Moody’s.

“Resolution” has themeaning given to it in Section 2.7(c).

“Resolution Date” hasthe meaning given to it in Section 2.7(d).

“Responding Party” hasthe meaning given to it in Section 10.6(a).

“Retention Plan” means the DukeEnergy Americas (DEA) Cinergy Marketing and Trading (CMT) Retention Plan.

“Risk Management Policies”means the risk management policies applicable to the Companies and set forth inthe Cinergy Commercial Business Unit Risk Management Control Policy Manualdated as of November 9, 2005, the Duke Energy Marketing Risk Limits datedas of April 1, 2006 and the Duke Energy Marketing Approved Products andInstruments Risk Addendum dated as of April 1, 2006.

“S&P” meansStandard & Poor’s Ratings Group (a division of McGraw Hill, Inc.)and any successors thereto.

“Schedules” means the disclosureschedules prepared by Seller and attached to this Agreement.

“Section 338(g) Election”has the meaning given to it in Section 6.14(f).

“Section 338(h)(10) Election”has the meaning given to it in Section 6.14(a).

“Seller” has the meaning given to it in the introductionto this Agreement.

“Seller Guaranty” means the Guaranty Agreementsubstantially in the form of Exhibit I executed and delivered pursuant to Section 2.3.

“Seller Approvals” has the meaning given to it in Section 3.3(c).

“Seller Group” meansthe affiliated group of corporations which includes Seller.

“Seller Marks” has the meaning givento it in Section 6.6.

“Seller Plans” or “Seller Plan” has the meaning givento it in Section 6.9(d).

“Seller Indemnified Parties”has the meaning given to it in Section 10.1(b).

“Seller’s Determination”has the meaning given to it in Section 2.7(b).

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“Services Agreement” means the Services Agreementsubstantially in the form of Exhibit D executed and delivered pursuant to Section 2.5.

“Shared Capacity”means that computing capacity in the Equipment used for both: (a) theoperations and business of the Companies (and the CG&E Transactions)(except for the computing capacity used for the functions and services listedin item 2 of Schedule 4.11(a) other than disaster recoveryservices) as currently conducted; and (b) the operations and business ofany Non-Company Affiliate as currently conducted.

“Signing Date” has themeaning given to it in the introduction to this Agreement.

“Signing Date Transactions”means those Marketing and Trading Transactions of CCI, CMT and CG&E as of June 23,2006 set forth on Schedule 2.3(b) to the extent having settlementand/or delivery dates on or after September 1, 2006.

“Software” means anyinstruction or set of instructions that is used (e.g., read, compiled,processed or manipulated) by, in or on Equipment, including applicationprogramming interfaces, source code and object code versions of applicationsprograms, operating system software, software tools, computer softwarelanguages and utilities software; in each case, in whatever form or media,including the tangible media upon which they are recorded or printed, togetherwith all corrections, improvements, enhancements, modifications, updates and releasesthereof prior to the Closing.

“Software and Intellectual PropertyLicense Agreement” means the Software and Intellectual PropertyLicense Agreement substantially in the form of Exhibit K executed anddelivered pursuant to Section 2.5(i) pursuant to which the LicensedIntellectual Property and Proprietary Applications are licensed to theCompanies.

“Statutory Plans”means statutory benefit plans which CCI is required to participate in or complywith, including the Canada and Quebec Pension Plans and plans administeredpursuant to applicable health tax, workplace safety insurance and employmentinsurance legislation.

“Straddle Period”means any Tax period that includes, but does not end on, the Closing Date.

“Support Obligations” has the meaning given to it in Section 6.7(a).

“Tax” or “Taxes”means (i) any federal, state, provincial, local or foreign income, grossreceipts, ad valorem, sales and use, goods and services, employment, socialsecurity, disability, occupation, property, severance, value added, transfer,Capital Stock, excise, withholding, premium, federal or provincial capitaltaxes, occupation or other taxes, levies or other like assessments, customs,duties, imposts, charges, surcharges or fees imposed by or on behalf of anyTaxing Authority, including any interest, penalty or addition attributablethereto or to the non-payment thereof and (ii) liability for Taxes of anyother Person of a kind described in clause (i) imposed (A) under U.S.Treasury Regulation Section 1.1502-6 (or any similar provision ofstate, provincial, local or foreign tax law), or otherwise as a result of beingor having been before the Closing Date a member of an affiliated, consolidated,combined or unitary group for federal, state, provincial, local or foreign taxpurposes, and (B) as a successor by contract or otherwise as

13



aresult of being party to any agreement or any express or implied obligation toindemnify any other Person.

“Taxing Authority” means, withrespect to any Tax, the governmental entity or political subdivision thereofthat imposes such Tax, and the agency (if any) charged with the collection ofsuch Tax for such entity or subdivision.

“Tax Return” means any return, reportor similar statement or form required to be filed with respect to any Tax(including any attached schedules and related or supporting information),including any information return, claim for refund, amended return ordeclaration of estimated Tax.

“Terminated Contracts”has the meaning given to it in Section 6.10.

“Third Party Software”has the meaning given to it in Section 6.5.

“Title and Authority Representations”has themeaning given to such term in Section 10.2(a).

“Trading Contracts”means, with respect to a Transaction, all master agreements, confirmations,Credit Support documents, schedules, credit support annexes, cover sheets,master netting agreements, master collateral agreements or similar or relatedagreements to which either Company, CG&E and/or a Duke Credit SupportProvider is a party, in each case that relate to such Transaction.

“Transactions” means,during the applicable period specified in this definition, the following: (i) asof the Signing Date, the Signing Date Transactions, (ii) on any date afterthe Signing Date and prior to the Closing Date, the Marketing and TradingTransactions to which CMT or CCI is a party as of such date and any CG&ETransactions existing as of such date, and (iii) as of and after theClosing Date, the Closing Date Transactions.

“Transfer Taxes” meansall transfer, sales, use, goods and services, value added, documentary, stampduty, gross receipts, excise, transfer and conveyance Taxes and other similarTaxes, duties, fees or charge, but excluding any income, capital gains orsimilar Taxes related to any such transfer.

“Transferred Capacity”means the portion of the Shared Capacity used in the operations and business ofthe Companies (and the CG&E Transactions) (except for the computingcapacity used for the functions and services listed in item 2 of Schedule4.11(a) other than disaster recovery services) as currently conducted.The form of the foregoing “Transferred Capacity” is not required to match theform of the Shared Capacity but is required to provide the same function andperformance as provided by the foregoing Transferred Capacity.

“Transferred Equipment”means all Equipment solely used in the operations and business of the Companies(including the CG&E Transactions) as currently conducted that is not ownedby the Companies.

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“Transition Services Agreement”means an agreement for the provision of services after Closing from the Sellerand/or its Affiliates to the Companies substantially in the form of Exhibit Hto be executed and delivered pursuant to Section 2.5.

“TRS Agreement” means the Total Return Swap Agreementsubstantially in the form of Exhibit C executed and delivered pursuant to Section 2.5.

“TRS Guaranty” has the meaning given to it in Section 2.6.

“Welfare Benefits” has the meaninggiven to it in Section 6.9(f).

Rules ofConstruction.

(a)           All article, section, subsection,schedules and exhibit references used in this Agreement are to articles,sections, subsections, schedules and exhibits to this Agreement unlessotherwise specified. The exhibits and schedules attached to this Agreementconstitute a part of this Agreement and are incorporated herein for allpurposes.

(b)           If a term is defined as one part ofspeech (such as a noun), it shall have a corresponding meaning when used asanother part of speech (such as a verb). Unless the context of this Agreementclearly requires otherwise, words importing the masculine gender shall includethe feminine and neutral genders and vice versa. The words “includes” or “including”shall mean “including without limitation,” the words “hereof,” “hereby,” “herein,”“hereunder” and similar terms in this Agreement shall refer to this Agreementas a whole and not any particular section or article in which such words appear.All references to any agreement, instrument, or document shall include suchagreement, instrument or document as the same may be amended, modified orsupplemented from time to time in accordance with its terms and the terms ofthis Agreement.

(c)           Currency amounts referenced hereinare in U.S. Dollars unless otherwise specified. In all cases where it is necessary to determine the amount of a Loss orwhether a monetary limit or threshold set out herein has been reached orexceeded and the value of the relevant Loss or underlying value is expressed ina currency other than U.S. Dollars, the value of each such Loss or underlyingvalue shall be converted into U.S. Dollars at an exchange rate equal to themost recent exchange rate published by TheFinancial Times on the date such payment is due hereunder (or, if nosuch exchange rate is published by TheFinancial Times, then the most recent exchange rate published by The Wall Street Journal on the date such payment is due hereunder).

(d)           It is the understanding of theParties that the intention of the determination and application of Net WorkingCapital and MTM Value of the Trading Book is solely to provide for theircalculation and is not being effected to permit the introduction of differentjudgments, accounting methods, policies, practices, procedures, classificationsor estimation methodologies when making such determination. If there is aconflict between GAAP and the methodologies set forth herein, then themethodologies set forth herein shall control for purposes of the foregoingdefinitions. Except as otherwise set forth herein, all accounting terms usedherein and not expressly defined herein shall have the meanings given to themunder GAAP.

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(e)           Time is of the essence in thisAgreement. Whenever this Agreement refers to a number of days, such numbershall refer to calendar days unless Business Days are specified. Whenever anyaction must be taken hereunder on or by a day that is not a Business Day, thensuch action may be validly taken on or by the next day that is a Business Day.

(f)            Each Party acknowledges that it andits attorneys have been given an equal opportunity to negotiate the terms andconditions of this Agreement and that any rule of construction to theeffect that ambiguities are to be resolved against the drafting Party or anysimilar rule operating against the drafter of an agreement shall not beapplicable to the construction or interpretation of this Agreement.

ARTICLEII
PURCHASE PRICE; DELIVERY OF DOCUMENTS

                2.1          Purchase and Sale. On the terms and subject to theconditions set forth in this Agreement, at the Closing:

(a)           Buyer agrees to purchase from Sellerand the applicable Parent Companies, and Seller agrees to convey or cause theParent Companies to convey to Buyer, the Purchased Interests.

(b)           Pursuant to the execution anddelivery of the applicable Assignment and Assumption Agreements referenced in Section 2.5,Buyer agrees to assume (or cause one of the Companies to assume), at Closingfrom each of the Non-Company Affiliates that are party to an Assigned Contract,and Seller agrees to cause such Non-Company Affiliates to assign to Buyer (orsuch Company), all of the rights and obligations of such Non-CompanyAffiliates, as applicable, under the Assigned Contracts.

                2.2          Purchase Price. The purchase price (the “Purchase Price”) forthe purchase and sale described in Section 2.1 and other undertakings andagreements set forth in this Agreement is equal to the sum of:

(a)           $210,000,000 (the “Base Purchase Price”);

(b)           plus, the MTM Value of theTrading Book;

(c)           plus, the Net Working Capital.

2.3          Deliverables on the Signing Date. On the Signing Date:

(a)           Buyer and Seller shall execute anddeliver to each other this Agreement;

(b)           Seller shall deliver Schedule 2.3(b) toBuyer, which schedule shall set forth the Signing Date Transactions;

(c)           Seller shall deliver Schedule 2.3(c) toBuyer, which schedule shall set forth the Support Obligations as of the SigningDate;

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(d)           Seller shall deliver to Buyer acounterpart of the Seller Guaranty executed by Cinergy Corp.; and

(e)           Seller shall deliver to Buyer the MTMSample Calculation and the lists of information to be provided by Seller toBuyer on the Signing Date pursuant to Section 6.9(a), (e) and (n).

                2.4          Closing. The Closing shall take place at the offices of Vinson &Elkins L.L.P., 1001 Fannin Street, Houston, Texas 77002 at 10:00 A.M.local time, on the third Business Day after the conditions to Closing set forthin ARTICLE VII and ARTICLE VIII (other than actions to be taken or items to bedelivered at Closing) have been satisfied or waived, or on such other date andat such other time and place as Buyer and Seller mutually agree in writing. TheClosing shall for all purposes be deemed to have been consummated at 12:01 A.M.Houston time on the Closing Date.

                2.5          Closing Deliveries by Seller to Buyer. At the Closing, Seller shalldeliver, or shall cause to be delivered, to Buyer the following:

(a)           a counterpart (i) executed bythe Parent Companies of an assignment of the Capital Stock of CMT in the formattached hereto as Exhibit A-1 and (ii) executed by Seller ofan assignment of the Capital Stock of CCI in the form attached hereto as Exhibit A-2(each a “CompanyAssignment Agreement”) evidencing the assignment and transfer toBuyer of the Purchased Interests owned by Seller or such Parent Company, asapplicable;

(b)           a counterpart executed by eachapplicable Non-Company Affiliate of one or more assignment and assumptionagreements each substantially in the form attached as Exhibit B (each an “Assignment and Assumption Agreement”)which shall effect the assignment to Buyer or one of the Companies, asdesignated by Buyer within thirty (30) days following the Signing Date (asapplicable, the “Assignee”),of each Assigned Contract by the Non-Company Affiliate that is party thereto(the “Assignor”)and the assumption by the Assignee of all obligations of the Assignor under eachAssigned Contract;

(c)           a certification of non-foreign statusin the form prescribed by Treasury Regulation Section 1.1445-2(c) withrespect to Seller and each Parent Company (or the owner of each Parent Companythat is treated as a disregarded entity for U.S. federal income Tax purposes);

(d)           Schedule 2.5(d), whichschedule shall set forth the Closing Date Transactions;

(e)           Schedule 2.5(e), whichschedule shall set forth the Support Obligations as of the Closing Date;

(f)            Schedule 2.8, which scheduleshall set forth the allocation of the Purchase Price;

(g)           a counterpart executed by Seller andthe Companies of the Transition Services Agreement;

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(h)           a counterpart of the TRS Agreementand the Services Agreement executed by CG&E and CMT;

(i)            a counterpart executed by CMT andthe applicable Non-Company Affiliate(s) identified therein of the Softwareand Intellectual Property License Agreement;

(j)            an executed counterpart of one ormore assignment and bill of sale agreements, each substantially in the form attachedas Exhibit J (each an “Assignment and Bill of Sale Agreement”), which shalleffect the transfer of ownership to the Assignee of the Transferred Equipmentby Seller or the Non-Company Affiliate that is the owner thereof;

(k)           the books and records of each Companynot present at such Company on the Closing Date and in the possession of Selleror a Non-Company Affiliate (it being agreed that Seller may retain a copythereof); and

(l)            a “clearance certificate” unders.116 of the Canadian Tax Act satisfactory to Buyer to evidence that nowithholding is required for the payment to Seller; provided that:

(i)                    ifa certificate issued by the Minister of National Revenue (Canada) pursuant tosubsection 116(2) of the Canadian Tax Act in respect of the disposition ofthe CCI shares to Buyer, specifying a certificate limit in an amount which isnot less than the portion of the Purchase Price allocable to the CCI shares, isnot delivered to Buyer at or before the Closing, Buyer shall be entitled towithhold from the Purchase Price payable to Seller at the Closing the amountthat it may be required to remit pursuant to subsection 116(5) of theCanadian Tax Act in connection with such purchase;

(ii)                   if,prior to the 28th day after the end of the month in which the Closing occurs(or such later time if the Canada Revenue Agency confirms in writing that Buyermay continue to hold the amount withheld pursuant to Section ((l))hereof), Seller delivers to Buyer:

(A)          a certificate issued by the Ministerof National Revenue under Section 116(2) of the Canadian Tax Act inrespect of the disposition of the CCI shares to Buyer, Buyer shall promptly payto Seller the lesser of (I) the amount withheld pursuant to Section 2.5(l) hereof,and (II) the amount withheld pursuant to Section 2.5(l) hereofless the amount, if any, by which the portion of the Purchase Price allocableto the CCI shares exceeds the amount specified in such certificate as thecertificate limit, multiplied by the percentage specified in subsection 116(5) ofsuch Act, together with any interest earned on the amount so withheld to thedate of such payment (less any applicable withholding Tax), or

(B)           a certificate issued by the Ministerof National Revenue under Section 116(4) of the Canadian Tax Act inrespect of the disposition of the CCI shares to Buyer, Buyer shall promptly paythe amount withheld pursuant to Section (l) hereof to Seller,together with any interest earned thereon (less any applicable withholdingTax);

(iii)                  ifBuyer has withheld an amount pursuant to Section 2.5(l)(i) hereof andSeller does not deliver to the Buyer, prior to the 28th day after the end ofthe month in which the Closing occurs (or such later time if the Canada RevenueAgency

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confirmsin writing that Buyer may continue to hold the amount withheld pursuant to Section 2.5(l)(i) hereof):

(A)          a certificate issued by the Ministerof National Revenue under Section 116(2) of the Canadian Tax Act inrespect of the disposition of the CCI shares to Buyer specifying a certificatelimit equal or greater than the portion of the Purchase Price allocable to theCCI shares; or

(B)           a certificate issued by the Ministerof National Revenue under Section 116(4) of the Canadian Tax Act inrespect of the disposition of the CCI shares to Buyer;

(iv)                  Buyershall remit to the Receiver General of Canada the amount required to beremitted pursuant to subsection 116(5) of the Canadian Tax Act (and theamount so remitted shall be credited to the Buyer as a payment to Seller onaccount of the Purchase Price) and Buyer shall pay to Seller any remainingportion of the amount withheld pursuant to Section 2.5(l)(i) hereof,together with interest earned on the amount withheld pursuant to Section 2.5(l)(i) hereof,prior to such remittance (less any applicable withholding Tax); and

(m)          For the avoidance of doubt, any netTax withheld by Buyer pursuant to this Section 2.5(l) shall betreated for all purposes of this Agreement as having been paid to Seller.

                2.6          Closing Deliveries by Buyer to Seller. At the Closing, Buyer shalldeliver to Seller (or, in the case of clause (d), to the applicablebeneficiary) the following:

(a)           a wire transfer of immediatelyavailable funds (to such account as Seller shall have notified Buyer of atleast three (3) Business Days prior to the Closing Date) in an amountequal to the result of:

(i)                    thesum of (A) the Base Purchase Price, plus (B) the MTM Estimate, plus (C) theNWC Estimate;

(ii)                   plus,Seller’s good faith estimate (“Credit Support Payment Estimate”) of the Credit SupportPayment;

(iii)                  minus,the portion of the Deferred Incentive Plan Amount that applies to the HiredEmployees;

(iv)                  minus,any withholding required under Section 2.5(l)(i);

(b)           an executed counterpart of eachCompany Assignment Agreement;

(c)           a counterpart executed by eachAssignee referenced in Section 2.5(b) of each Assignment andAssumption Agreement;

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(d)           without duplication of the CreditSupport Payment referred to in Section 2.6(a)(ii), all guaranties, cash,letters of credit or other replacement credit support required to be deliveredat the Closing to Seller, any of its Affiliates or any beneficiary of a SupportObligation pursuant to Section 6.7;

(e)           a counterpart executed by Buyer ofthe Transition Services Agreement;

(f)            a counterpart executed by Buyer ofthe Software and Intellectual Property License Agreement; and

(g)           a counterpart executed by Fortis BankSA/NV Cayman Islands Branch of the guaranty of CMT’s obligations under the TRSAgreement and the Services Agreement, substantially in the form required by theTRS Agreement and the Services Agreement (the “TRS Guaranty”).

                2.7          Adjustments to MTM Value and Net Working Capital.

(a)           Adjustments to Schedule 2.5(d).If a Party in good faith believes that there is (i) any inaccuracy and/or omission with respect toa Material Economic Term of any Closing Date Transaction as set forth on Schedule2.5(d) or (ii) a Closing Date Transaction of CMT or CCI that wasomitted from Schedule 2.5(d) that is with a Counterparty other thana Counterparty to a Closing Date Transaction or a Cornerstone Transaction (eachsuch omitted Closing Date Transactions described in this clause (ii) beingan “Omitted CounterpartyTransaction”), then such Party shall deliver to the other Partyon or prior to the 120th day following the Closing Date (or, in the case of (A) aClosing Date Transaction that was entered into after the Signing Date and priorto Closing, the 180th day following the Closing Date and (B) an OmittedCounterparty Transaction, the 18-month anniversary of the Closing) awritten notice (“DisputeNotice”) containing a detailed description of such inaccuracy oromission. If no Party provides a Dispute Notice to the other Party on or priorto the date set forth in the preceding sentence applicable to such Transaction,the Parties shall be deemed to have accepted Schedule 2.5(d), whichshall then be deemed final, binding and conclusive for all purposes hereunder. Ifa Dispute Notice is timely provided, then the Parties shall each use theirrespective good faith efforts for a period of fifteen (15) days after deliveryof such Dispute Notice to agree on (1) whether such an inaccuracy oromission exists and, if so, what revisions should be made to Schedule 2.5(d) tocorrect the same, and (2) what, if any, adjustments need to be made to thePurchase Price to reflect such corrections; provided that any such adjustmentto the Purchase Price shall be consistent with the methodology and calculationsset forth on the MTM Sample Calculation. If the Parties are unable to agree onsuch revisions or adjustments by the end of such fifteen (15) day period, thenany such disagreement shall be resolved in accordance with Section 2.7(c).Promptly following the Resolution Date, the Parties shall prepare a revised Schedule2.5(d), which shall correct any such inaccuracy or omission in accordancewith the resolution reached pursuant to this Section 2.7 (including clause(c) hereof) and such revised Schedule 2.5(d) shall be used asa replacement for Schedule 2.5(d) for all purposes hereunder.

(b)           Adjustments to Net WorkingCapital, MTM Value, and Credit Support Payment. Within ninety (90) daysafter the Closing Date in the case of Net Working Capital, within ten (10) BusinessDays after the Closing Date in the case of MTM Value of the Trading

 

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Book,and within five (5) Business Days after the Closing Date in the case ofthe Credit Support Payment, Seller shall determine the actual Net WorkingCapital, MTM Value of the Trading Book, and Credit Support Payment and shallprovide Buyer with written notice of such determination, along with reasonablesupporting information and calculations (each, a “Seller’s Determination”). If Buyerobjects to any Seller’s Determination above, then it shall provide Sellerwritten notice thereof within twenty-one (21) days after receiving theapplicable Seller’s Determination, specifying the specific matters in dispute. Ifthe Parties are unable to agree on the Net Working Capital, MTM Value of theTrading Book, or Credit Support Payment within fourteen (14) days after theapplicable date on which the Buyer objects to Seller’s Determination pursuantto the preceding sentence, then any such disagreement shall be resolved inaccordance with Section 2.7(c). If Buyer does not object to Seller’sDetermination within the time period and in the manner set forth in the secondsentence of this Section 2.7(b) or if Buyer accepts Seller’sDetermination, the Net Working Capital, MTM Value of the Trading Book, orCredit Support Payment, as applicable, as set forth in Seller’s Determinationshall become final and binding upon the Parties for all purposes hereunder. Ifthe actual Net Working Capital, MTM Value of the Trading Book, or CreditSupport Payment (as agreed between the Parties or as determined pursuant toclause (c) below) is greater than the NWC Estimate, MTM Estimate, orCredit Support Payment Estimate, as applicable, then Buyer shall pay Seller anamount equal to the difference between such amounts in accordance with Section 2.7(d).If the actual Net Working Capital, MTM Value of the Trading Book, or CreditSupport Payment (as agreed between the Parties or as determined pursuant toclause (c) below) is less than the NWC Estimate, MTM Estimate, or CreditSupport Payment Estimate, as applicable, then Seller shall pay Buyer the absolutevalue of the difference between such amounts in accordance with Section 2.7(d).

(c)           Dispute Resolution by SeniorManagement and Independent Accountants. If the Parties are unable toresolve any disagreement with respect to the matters described in Section 2.7(a)or(b)(each a “Disagreement”)within the time periods and through the procedures set forth therein, thenBuyer, on the one hand, and Seller, on the other hand, shall each nominatepromptly (and in any event within five (5) BusinessDays) an officer from their senior management to use commercially reasonableefforts to resolve such Disagreement on or before the tenth day following suchnomination. If such senior management representatives are unable to resolvesuch Disagreement by the end of such ten (10) day period, then any Partymay refer such Disagreement to the Independent Accountant, and such referringParty shall give prompt written notice (“Referral Notice”) to the other Party (with acopy to such Independent Accountant) of its referral of such Disagreement tosuch Independent Accountant (the date of delivery of such notice to the otherParties being the “ReferralDate”), which notice shall identify the Independent Accountant,state that it is a Referral Notice under this Section 2.7(c) andcontain a detailed description of any Disagreement being then referred to suchIndependent Accountant. The Independent Accountant shall execute aconfidentiality agreement, in form and substance reasonably satisfactory toBuyer and Seller, with each of Buyer and Seller with respect to anyconfidential or proprietary information that may be provided to it inconnection with its role under Section 2.7(c). The Parties shall cooperatewith the Independent Accountant during the term of its engagement. Within ten (10) BusinessDays after the Referral Date, each of Buyer, on the one hand, and Seller, onthe other hand, shall submit a written proposal to the Independent Accountantidentifying its proposed resolution of the Disagreement and any resultingadjustment to the Purchase Price. The Independent Accountant shall resolve each

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Disagreementas promptly as practicable and in any event within thirty (30) days of theReferral Date by notifying the Parties in writing of its resolution of theDisagreement, which resolution shall be in accordance with the calculations andmethodologies set forth herein (the “Resolution”). The Independent Accountantshall be required to make its determination (i) in accordance with theguidelines and procedures set forth in this Agreement (i.e., not on the basisof an independent review) and (ii) only with respect to Disagreementsspecifically set forth in the applicable Referral Notice. The Resolution by theIndependent Accountant of any Disagreement, may, in the Independent Accountant’sdiscretion, identify the prevailing Party (the “Prevailing Party”) and shall becomefinal and binding on the Parties on the date the Independent Accountantdelivers to the Parties its written notice of Resolution with respect to suchDisagreement. The fees and expenses of the Independent Accountant shall be paidby the non-Prevailing Party unless no Prevailing Party is identified, in whichcase the fees and expenses of the Independent Accountant shall be sharedequally by Buyer, on the one hand, and Seller, on the other hand.

(d)           Resolution Date; Payments. Withrespect to any matter described in Section 2.7, the earliest date on whicheither (i) such matter is resolved pursuant to Section 2.7(a) or(b)or (ii) the last disputed item with respect to a Disagreement on suchmatter is resolved in accordance with Section 2.7(c) shall bereferred to herein as the “ResolutionDate” for such matter. Upon the Resolution Date, the Party owingany amount to the other Party pursuant to any such adjustment to the PurchasePrice pursuant to this Section 2.7 shall pay such other Party within three(3) Business Days following such Resolution Date such amount by wiretransfer of immediately available funds to an account designated in writing bythe Party that is to receive such payment. Any such payment shall includeinterest on such amount accrued from the Closing Date to but excluding the dateof such payment at a rate of 7% per annum.

                2.8          Allocation of Purchase Price.Seller and Buyer agree that the Purchase Price shall be allocated between theCompanies in accordance with the allocation set forth on Schedule 2.8. Followingthe sale of the Purchased Interests, Buyer and Seller in connection with theirrespective U.S. federal, state, and local tax returns and other filings(including without limitation Internal Revenue Service Form 8594), shallnot take any position inconsistent with such allocation (or any adjustment tosuch allocations). Any adjustment to the Purchase Price (including as a resultof Section 10.7) shall be allocated as provided by Treas. Reg. §1.1060-1(c),as applicable.

2.9          True Up for Deferred Incentive PlanAmount. Promptlyfollowing payment to Hired Employees of the Deferred Incentive Plan Amountrequired to be paid to them by Buyer pursuant to Buyer’s covenant in Section 6.9(n) (andin no event later than April 30, 2007 (or, if later, in the case ofamounts described under clause (ii) of the definition of DeferredIncentive Plan Amount, on the date of the last payment to the applicable HiredEmployee of the amounts required to be paid by Buyer pursuant to the lastsentence of Section 6.9(n)), Buyer and Seller shall compare the DeferredIncentive Plan Amount applicable to each Hired Employee to the amounts actuallypaid by Buyer to such Hired Employee pursuant to Section 6.9(n), and ifthe amount paid to such Hired Employee by Buyer pursuant to Section 6.9(n) isless than the Deferred Incentive Plan Amount applicable to such Hired Employee,then Buyer shall promptly (and in any event within five (5) Business Days)pay the difference to the Seller, by wire transfer of immediately availablefunds to an account designated by Seller.

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ARTICLEIII
REPRESENTATIONS AND WARRANTIES REGARDING SELLER

Seller herebyrepresents and warrants to Buyer that:

                3.1          Organization. Each of Seller and each Non-Company Affiliate (other thanCG&E) that is a party to an Ancillary Agreement is duly organized, validlyexisting and in good standing under the Laws of its jurisdiction oforganization.

                3.2          Authority.

(a)           Seller has all requisite corporatepower and authority to execute and deliver this Agreement and the AncillaryAgreements to which it is or will be a party and to perform its obligationshereunder and thereunder. The execution and delivery by Seller of thisAgreement and the Ancillary Agreements to which it is or will be a party, andthe performance by Seller of its obligations hereunder and thereunder, havebeen duly and validly authorized by all necessary corporate action. ThisAgreement and the Ancillary Agreements to which Seller is or will be a partyare, or when executed will have been, duly and validly executed and deliveredby such Seller, and this Agreement and the Ancillary Agreements to which it isor will be a party constitute, or when executed will constitute, the legal,valid and binding obligation of Seller enforceable against Seller in accordancewith its terms, except as the same may be limited by bankruptcy, insolvency,reorganization, fraudulent conveyance, arrangement, moratorium or other similarLaws relating to or affecting the rights of creditors generally, or by generalequitable principles.

(b)           Each Non-Company Affiliate (otherthan CG&E) that is a party to an Ancillary Agreement has all requisite company power andauthority to execute and deliver the Ancillary Agreements to which it is orwill be a party and to perform its obligations thereunder. The execution anddelivery by such Non-Company Affiliate of the Ancillary Agreements to which itis or will be a party, and the performance by such Non-Company Affiliate of itsobligations thereunder, have been duly and validly authorized by all necessarycorporate, partnership or company action. The Ancillary Agreements to whichsuch Non-Company Affiliate is or will be a party are, or when executed will havebeen, duly and validly executed and delivered by such Non-Company Affiliate,and the Ancillary Agreements to which it is or will be a party constitute, orwhen executed will constitute, the legal, valid and binding obligation of suchNon-Company Affiliate enforceable against such Non-Company Affiliate inaccordance with its terms, except as the same may be limited by bankruptcy,insolvency, reorganization, fraudulent conveyance, arrangement, moratorium orother similar Laws relating to or affecting the rights of creditors generally,or by general equitable principles.

                3.3          No Conflicts. The execution and delivery by Seller, and each Non-CompanyAffiliates (other than CG&E) that is a party to any Ancillary Agreement, ofthis Agreement and the Ancillary Agreements to which it is or will be a party,and the performance by such Person of its obligations hereunder and thereunder,as applicable, do not:

(a)           violate or result in a breach of theCharter Documents of Seller or such Non-Company Affiliate;

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(b)           assuming all of the Company Consentshave been made, given or obtained, violate, breach or result in a default underany Contract to which Seller or such Non-Company Affiliate is a party; and

(c)           assuming all required filings,waivers, approvals, consents, authorizations and notices set forth on Schedule 3.3(c) (collectively,the “Seller Approvals”),the Company Consents and other customary notifications provided in connectionwith the consummation of the transactions contemplated by this Agreement havebeen made, given, or obtained (i) violate or result in a breach of any Lawapplicable to Seller or such Non-Company Affiliate or (ii) require anyconsent or approval of any Governmental Authority under any Law applicable toSeller or such Non-Company Affiliate.

                3.4          Capitalization. Cinergy Limited Holdings, LLCand/or its successors is the record and beneficial holder of a 99.9% limitedpartner’s interest in CMT and Cinergy General Holdings, LLC and/or itssuccessors is the record and beneficial holder of a 0.1% general partner’sinterest in CMT. Except as set forth on Schedule 4.3, the Seller is the recordand beneficial holder of 100% of the shares of the stock of CCI. All of theownership interests described in this Section 3.4 are held by theapplicable entity free and clear of all Liens other than those (a) arisingpursuant to this Agreement or applicable securities Laws or (b) for Taxesnot yet due or delinquent or being contested in good faith.

                3.5          Legal Proceedings. Except as disclosed in Schedule3.5, (a) there are no Proceedings pending or, to Seller’s Knowledge,threatened against Seller or any Parent Company before or by any GovernmentalAuthority and (b) there are no unsatisfied judgments or open injunctionsbinding upon Seller or such Parent Company.

                3.6          Brokers’ Fees. No broker, finder, investmentbanker or other Person is entitled to any brokerage fee, finders’ fee or othercommission with respect to the transactions contemplated by this Agreementbased upon arrangements made by Seller or any of its Affiliates, except forfees that will be paid by Seller or its Non-Company Affiliates.

ARTICLEIV
REPRESENTATIONS AND WARRANTIES REGARDING
THE COMPANIES AND CG&E

Seller herebyrepresents and warrants to Buyer that:

                4.1          Organization.

(a)           Each of the Companies and CG&E isa corporation or limited partnership, as applicable, duly organized, validlyexisting and in good standing under the Laws of its jurisdiction oforganization. Each of the Companies has all requisite company power andauthority to conduct its business as it is now being conducted and to own andoperate its assets.

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Eachof the Companies is duly licensed or qualified to transact business as aforeign or extra provincial corporation or foreign limited partnership, asapplicable, in each jurisdiction in which the ownership or operation of itsassets make such qualification or licensing necessary.

(b)           Each of the Companies and CG&Ehas all requisite corporate or partnership, as applicable, power and authorityto execute and deliver the Ancillary Agreements to which it is or will be aparty and to perform its obligations thereunder. The execution and delivery byeach of the Companies and CG&E of the Ancillary Agreements to which it isor will be a party, and the performance by each of the Companies and CG&Eof its obligations thereunder, have been duly and validly authorized by allnecessary corporate or partnership action, as applicable. The AncillaryAgreements to which each of the Companies or CG&E is or will be a partyare, or when executed will have been, duly and validly executed and deliveredby such Company or CG&E, as applicable, and such Ancillary Agreementsconstitute, or when executed will constitute, the legal, valid and bindingobligation of such Company or CG&E, as applicable, enforceable against suchCompany or CG&E, as applicable, in accordance with its terms, except as thesame may be limited by bankruptcy, insolvency, reorganization, fraudulentconveyance, arrangement, moratorium or other similar Laws relating to oraffecting the rights of creditors generally, or by general equitableprinciples.

                4.2          No Conflict. The execution and delivery by the Companies and CG&E ofthe Ancillary Agreements to which it is or will be a party, and the performanceby such Person of its obligations thereunder, do not:

(a)           violate or result in a breach of theCharter Documents of such Company or CG&E, as applicable,

(b)           assuming the consents set forth on Schedule4.2 (the “CompanyConsents”) have been made, given or obtained, breach or resultin a default in any respect under any Contract (but excluding in any event theContracts relating to the Transactions) to which such Company or CG&E is aparty; and

(c)           assuming the Seller Approvals, theCompany Consents and other customary notifications provided in connection withthe consummation of the transactions contemplated by this Agreement have beenmade, given, or obtained (i) violate or result in a breach of any Lawapplicable to such Company or CG&E, as applicable, or (ii) require anyconsent or approval of any Governmental Authority under any material Lawapplicable to such Company or CG&E, as applicable.

                4.3          Capitalization. Except as set forth on Schedule4.3, no Company is a party to any Contract for the purchase, subscription,allotment or issue of any unissued interests, units or other securities(including convertible securities, warrants or convertible obligations of anynature) of either Company. CMT has no subsidiaries and CCI has no subsidiaries.Prior to the Signing Date, CMT has transferred the limited liability companyinterests in Ohio River Valley Propane, LLC to Seller or one or moreNon-Company Affiliates. True and correct copies of the Charter Documents of theCompanies in effect as of the date of this Agreement have been delivered toBuyer by Seller.

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                4.4          Legal Proceedings. Except as set forth on Schedule 4.4,(a) there are no Proceedings pending or, to Seller’s Knowledge, threatenedagainst either Company or, with respect to the CG&E Transactions only,CG&E before or by any Governmental Authority and (b) there are nounsatisfied judgments or open injunctions binding upon either Company or, withrespect to the CG&E Transactions only, CG&E.

                4.5          Compliance with Laws. Each Company is in compliancewith all Laws, including environmental laws, applicable to it; provided thatthis Section 4.5 does not address matters relating to Taxes, which areexclusively addressed by Section 4.8, matters relating to employee mattersor Benefit Plans, which are exclusively addressed by Sections 4.13 and 4.14, ormatters relating to permits and licenses which are exclusively addressed in Section 4.17.

                4.6          No Default or Termination. Except as set forth on Schedule4.6 to the Knowledge of Seller, (i) none of the Companies nor CG&Ehas delivered to or received from any Counterparty to a Transaction or aCornerstone Contract during the ninemonthperiod preceding the respective date on which this Section 4.6representation is being made, any written notice of default or written noticeof termination with respect to such Transaction or Cornerstone Contracts, towhich such Company or CG&E is a party and (ii) there is no event ofdefault or termination resulting from a failure to make a payment when due orto post cash or letters of credit as credit support when due, in each case withrespect to a Transaction or a Cornerstone Contract, as applicable, to whichsuch Company or CG&E is a party, that has not been cured.

                4.7          Market Based Rate Authority. Except as set forth on Schedule4.7, each of CMT and CG&E represents that it has on file with FERCeffective rate schedules to make sales of electric energy, capacity, andancillary services at market-based rates in compliance with the FPA and thatsuch rate schedules are in full force and effect. Except as set forth on Schedule4.7, each of the Transactions which is subject to rate regulation by aGovernmental Authority is authorized to take place at market-based rates.

4.8          Taxes. Except as set forth on Schedule 4.8:

(a)           all Tax Returns that are required tobe filed on or before the Closing Date by each Company have been or will beduly and timely filed and such returns are true, complete and correct;

(b)           all Taxes of each Company that aredue and payable on or before the Closing Date have been or will be timely paidin full;

(c)           all withholding Tax requirements(whether monetary or informational in nature) imposed on each Company that aredue and payable on or before the Closing Date have been or will be satisfied,and each Company has withheld and collected all amounts required by applicableLaw to be withheld or collected by it on account of Taxes and has remitted allsuch amounts to the appropriate Governmental Authority within the timeprescribed under any applicable Law;

(d)           neither Company has in force anywaiver of any statute of limitations in respect of Taxes or any extension oftime with respect to a Tax assessment or deficiency;

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(e)           as of the date of this Agreement,there are no pending or active audits or legal proceedings involving Taxmatters or, to Seller’s Knowledge, threatened audits or proposed deficienciesor other claims for unpaid Taxes of either Company, and Seller will notifyBuyer of any audits, deficiency, or legal proceedings involving Tax mattersthat arises during the period beginning the date of this Agreement and endingon the Closing Date;

(f)            there are no Liens on any of theassets of the Companies with respect to Taxes other than Permitted Tax Liens;

(g)           each of CMT and CCI is classified asan association taxable as a corporation for U.S. federal income tax purposes;

(h)           each of the Parent Companies isclassified as an entity disregarded as separate from Seller for U.S. federalincome tax purposes;

(i)            CMT is a member of the Seller Group,and CMT has never filed a consolidated or combined Tax return for federal,state or local income Tax purposes other than as a member of the Seller Group;

(j)            neither CMT nor CCI has received awritten Tax opinion with respect to any transaction relating to CMT and CCI;and as of the date of this Agreement, there are no requests for rulings ordeterminations pending between or with respect to CMT or CCI on the one hand,and any Taxing Authority on the other hand, and Seller will notify Buyer of anyrequest for such a ruling or determination that arises following this Agreementand up to and including the Closing Date;

(k)           neither CMT nor CCI has engaged inany transaction that would be reportable pursuant to Treasury Regulation Section 1.6011-4or any predecessor thereto;

(l)            neither CMT nor CCI will be requiredto include in any period ending after the Closing Date any income that accruedin a prior period but was not recognized in any prior period, including as aresult of the installment method of accounting, the completed contract methodof accounting, the long-term contract method of accounting, the cash method ofaccounting, any adjustment pursuant to Section 481(a) of the Code byreason of a voluntary change in accounting method, or the claiming of anyreserve under the Canadian Tax Act, other than any income resulting from themarking-to-market for financial accounting purposes of Contracts that are notalso marked-to-market for Tax purposes;

(m)          for Tax purposes, each of CMT and CCIis and has been resident only in the jurisdiction in which it is currentlyorganized and has never had a permanent establishment or other taxable presencein any jurisdiction other than the jurisdiction in which it is resident for Taxpurposes, and no claim has ever been made in a jurisdiction where a Companydoes not file Tax Returns that such Company is or may be subject to Tax in thatjurisdiction;

(n)           there are no Tax sharing, Taxindemnity, Tax allocation or similar agreements with respect to Taxes in effectto which CMT is a party, except for any agreement among members of the SellerGroup (and except for this Agreement);

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(o)           there are no circumstances existingwhich could result in the application of section 17, section 78, section 79, orsections 80 to 80.04 of the Canadian Tax Act, or any equivalent provision underapplicable provincial law, to either Company;

(p)           neither Company is subject to anyliability for Taxes of any other Person imposed by a Taxing Authority inCanada;

(q)           neither Company has acquired propertyor services from, or disposed of property or provided services to, a personwith whom it does not deal at arm’s length (within the meaning of the CanadianTax Act) for an amount that is other than the fair market value of suchproperty or services, nor has either Company been deemed to have done so forpurposes of the Canadian Tax Act; and

(r)            for all transactions betweenCCI, on the one hand, and any non-resident Person with whom CCI was not dealingat arm’s length, for the purposes of the Canadian Tax Act, on the other hand,during a taxation year commencing after 2004 and ending on or before theClosing Date, CCI has made or obtained records or documents that satisfy therequirements of paragraphs 247(4)(a) and (b) of the Canadian Tax Act.

                4.9          Real Property.

(a)           None of the Companies owns any realproperty.

(b)           None of the Companies is the tenant(and none of the Non-Company Affiliates is a tenant on behalf of the Companies)of any real property, except for the real property leased to the Companies (ora Non-Company Affiliate on behalf of the Companies) under the leases set forthon Schedule 4.9(b) or any replacement or substitute lease executedafter the Signing Date and providing substantially similar benefits to theCompanies as those set forth on Schedule 4.9(b) (the “Real Property Leases”).

(c)           (i) The Real Property Leases arein full force and effect, and (ii) each of the Companies (or a Non-CompanyAffiliate on behalf of the Companies) has paid all rent and other charges dueand complied with all of its respective obligations under the Real PropertyLeases.

                4.10        Insurance. Schedule 4.10 setsforth a list of all insurance policies held by or issued specifically on behalfof and for the benefit of the Companies as of the date of this Agreement, otherthan any such insurance policies (a) related to Benefit Plans, (b) providedthrough self-insurance by a Non-Company Affiliate or (c) that are for thegeneral benefit of the Companies and their Affiliates.

                4.11        Intellectual Property and Software.

(a)           To Seller’s Knowledge, except as setforth on Schedule 4.11(a) and except for the Excluded Items,immediately prior to the Closing, the Companies will own, or have the licenseor right to use, all Intellectual Property, Software and Data used in the operations and

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businessof the Companies (including the CG&E Transactions), as currently conductedand the Transferred Equipment and Transferred Capacity.

(b)           Schedule 4.11(b) setsforth a complete and accurate list as of the date of this Agreement of (i) allpatents and patent applications, trademark registrations and copyrightregistrations, and applications for trademark and copyright registrations, ineach case that are owned by either of the Companies, and (ii) all patentsand patent applications, trademark and copyright registrations and applicationsfor trademark and copyright registrations, in the case of clauses (i) and (ii) thatare owned by Seller or any Non-Company Affiliate and are used in the operationsand business of the Companies (including the CG&E Transactions) ascurrently conducted (other than the Seller’s Marks, the Excluded Items, and theitems on Schedule 4.11(a)) (the “Registered Intellectual Property”). Allrequired fees to register and maintain the Registered Intellectual Propertythat are due have been paid, and none of the Registered Intellectual Propertyis the subject of any pending opposition proceedings, pending cancellationproceedings, pending interference proceedings or any other similaradministrative challenge.

(c)           As of the date of this Agreement, theProprietary Applications are listed on Schedule 4.11(c).

(d)           The Seller, applicable Non-CompanyAffiliates and the Companies have taken reasonable measures to protect andpreserve the confidentiality of the Companies’ trade secrets and confidentialinformation. To Seller’s Knowledge, Persons involved in the development andauthoring of the Intellectual Property owned by the Companies have executedagreements vesting or assigning the ownership rights of any IntellectualProperty of such Persons in such Intellectual Property to either of the Companiesor to a Person granting the Software and Intellectual Property LicenseAgreement.

(e)           Except as disclosed on Schedule4.11(e): (i) to Seller’s Knowledge, neither of the Companies havemisappropriated or infringed upon any Intellectual Property of any thirdPerson; (ii) no Claim of any such misappropriation or infringement hasbeen made or asserted against either Company; and (iii) none of the Selleror the Non-Company Affiliates has received any written notice of any such Claim.Except as disclosed on Schedule 4.11(e): (i) to Seller’s Knowledge,no Person has misappropriated or infringed upon any Intellectual Property ownedby the Companies; and (ii) no Claim of any such misappropriation orinfringement has been made or asserted by either Company against any Person.

(f)            As of the date of this Agreement,the Transferred Equipment used in the operations of the Companies, the absenceof which would be reasonably likely to cause a material disruption to theoperations and business of the Companies (including the CG&E Transactions)as currently conducted, is listed on Schedule 4.11(f).

(g)           The Buyer has been provided with, oraccess to, copies of all Material Software Licenses, as amended through thedate of this Agreement. Neither of the Companies nor any Non-Company Affiliate,as applicable, are in breach or default under any Material Software License.

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                4.12        Brokers’ Fees. No broker, finder, investment banker or other Person isentitled to any brokerage fee, finders’ fee or other commission with respect tothe transactions contemplated by this Agreement based upon arrangements made bySeller or any of its Affiliates except for fees that will be paid by Seller orits Non-Company Affiliates.

                4.13        Employees and Labor Matters. CMT does not have employees and,except as described on Schedule 4.13, has never had any employees. Sellershall provide Buyer as soon as practicable after Signing Date and shall updateas appropriate up to Closing Date, a complete list as of the date of thisAgreement of each of the Canadian Employees employed or retained by CCI,whether actively at work or not, their salaries, wage rates, commissions andconsulting fees, bonus arrangements, positions, status as full-time orpart-time employees, location of employment and length of service. With respectto all Canadian Employees and Available Employees and except as described on Schedule4.13:

(a)           no Canadian Employees or AvailableEmployees are represented by a union or other collective bargaining entity in amanner affecting the Companies and no collective bargaining agreement to whicheither Company is a party is currently being negotiated in respect of suchemployees;

(b)           there has not occurred, nor, toSeller’s Knowledge has there been threatened, a labor strike, request forrepresentation, organizing campaign, work stoppage, slowdown, or lockout orother labor dispute by or involving the Canadian Employees or the AvailableEmployees in the past two years prior to the Signing Date;

(c)           neither Seller nor any of itsAffiliates has received notice of any charges against either Company before anyGovernmental Authority responsible for the prevention of unlawful employmentpractices involving any of the Available Employees or the Canadian Employeesand the Companies are in compliance with all applicable Laws respectingemployment practices, labor relations, terms and conditions of employment andsimilar Laws;

(d)           to Seller’s Knowledge, as of the dateof this Agreement, there are no internal investigations into allegationsbrought by or against any Available Employees or Canadian Employees of unlawfulemployment practices, breach of any terms or conditions of employment,employment discrimination or harassment claims, breach of fiduciary duties,fraud, or any other claim arising out of or related to the employmentrelationship;

(e)           no unfair labor practice complaint,grievance or arbitration proceeding is pending or, to Seller’s Knowledge,threatened, against either Company before any Governmental Authority withrespect to the Available Employees or the Canadian Employees;

(f)            as of the date of this Agreement noCanadian Employee or Available Employee has any agreement to which eitherCompany is a party as to length of notice or severance payment required toterminate his or her employment, other than such as results by Law from theemployment of an employee without an agreement as to notice or severance; and

(g)           with respect to the AvailableEmployees or the Canadian Employees, there are no outstanding assessments,penalties, fines, liens charges, surcharges or other amounts due or owing byeither Company pursuant to any workplace safety and insurance Laws.

 

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                4.14        Employee Benefits.

(a)           Canadian Employee Benefit Plans.Schedule 4.14 sets forth a complete list of the Canadian EmployeeBenefit Plans as of the date of this Agreement. Copies of all Canadian EmployeeBenefit Plans have been made available to Buyer. Except as disclosed in Schedule4.14, Seller and CCI have no formal plans and have made no promise toimprove or change the benefits provided under any Canadian Employee BenefitPlan since March 31, 2006. Each of the Canadian Employee Benefit Plans hasbeen established, registered and administered in compliance with the terms andconditions of such Canadian Employee Benefit Plan and all applicable Laws. Allemployer and employee contributions and premiums that are required in respectof each Canadian Employee Benefit Plan have been paid when due. Other thanroutine claims for benefits, there are no Proceedings pending or, to Seller’sKnowledge, threatened against either Company before any Governmental Authorityinvolving any Canadian Employee Benefit Plan. CCI does not sponsor, maintain,or participate in, and has no liability, contingent or otherwise, with respectto a registered pension plan as defined in Section 248(1) of theIncome Tax Act (Canada) or with respect to a pension plan for whichregistration has been revoked.

(b)           United States Benefit Plans. CMT does not sponsor, maintain or contributeto any Benefit Plan. Except as set forth on Schedule 4.14, asof the date of this Agreement, CMT is not a party to nor obligated under anyemployment or severance agreements providing for payments upon a change incontrol. With respect to any “employee benefit plan,” within the meaning of Section 3(3) ofERISA, that is sponsored, maintained or contributed to, or has been sponsored,maintained or contributed to within six years prior to the date of thisAgreement by Seller or any ERISA Affiliate, (a) no withdrawal liability,within the meaning of Section 4201 of ERISA, has been incurred, whichwithdrawal liability has not been satisfied, (b) no liability to the PensionBenefit Guaranty Corporation has been incurred by any such entity (other thanroutine Pension Benefit Guaranty Corporation premiums), which liability has notbeen satisfied, (c) no accumulated funding deficiency, whether or notwaived, within the meaning of Section 302 of ERISA or Section 412 ofthe Code has been incurred, and (d) all contributions (includinginstallments) to such plan required by Section 302 of ERISA and Section 412of the Code have been timely made. None of the Available Employees is coveredby an employment agreement or otherwise which could result in CMT beingobligated to pay compensation or benefits which are excess parachute paymentspursuant to section 280G of the Code.

                4.15        Liabilities. As of the date of this Agreement, except for liabilitiesdisclosed on Schedule 4.15, neither Company has liabilities in excess of$500,000 that would be required to be reflected on an unaudited balance sheetof such Company prepared in accordance with GAAP.

                4.16        Other Assets. Neither of the Companies owns tangible assets for thegeneration, transmission or distribution of electricity or the gathering,transportation, distribution or storage of natural gas or crude oil.

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                4.17        Licenses. Excluding any Intellectual Property licenses or permits, theCompanies hold, or have the right to use, all licenses or permits necessary inthe operation of the business as currently conducted.

                4.18        Financial Information.

(a)           The Management Reports of theCompanies relating to periods in fiscal year 2005 and the portion of the fiscalyear 2006 ended on or prior to March 31, 2006, taken as a whole, fairlypresent in a manner consistent with the past practices of the Companies theeconomic gross margin and direct operating costs on an aggregate basis for theCompanies (and including, for purposes of this Section 4.18(a), theCG&E Transactions) for the fiscal year ended on December 31, 2005 andfor the three-month period ended on March 31, 2006; provided that, forpurposes of clarification, such economic gross margin has not been prepared inaccordance with GAAP.

(b)           Except as set forth or describedin the work papers prepared by Deloitte & Touche supporting suchfinancial statements, the unaudited balance sheets and the related unauditedstatements of income and cash flowsfor CMT (Houston gas trading) and of CCI (Canada gas trading) as of and for the12-month period ended December 31, 2005 and the three-month periodended March 31, 2006, and attached hereto as Exhibit L, fairlypresent in all material respects, substantially in accordance with GAAP, thefinancial condition, results of operations and cash flows, taken as a whole, of CMT for the Houston gastrading business and of CCI for the Canadian gas trading business as of suchdates and for the periods indicated, subject, in the case of such financialstatements for the three-month period ended March 31, 2006, to normal yearend adjustments.

                4.19        No Adverse Changes. Except as disclosed in Schedule4.19, from March 31, 2006 through the Signing Date, there has been noMaterial Adverse Effect.

                4.20        Contracts and Commitments.

(a)           Excluding (i) the Transactionsand any Contracts and/or Trading Contracts relating to the Transactions, (ii) AffiliateContracts, (iii) Cornerstone Contracts, (iv) any Credit Supportassociated with the items listed in Section 4.20(a)(i) through (iii),(iv) Contracts pursuant to which neither the Company nor any of its assetswill be bound or have liability after Closing (including any Contractsassociated with or relating to any Excluded Items), and (v) Benefit Plans,Schedule 4.20 sets forth a list as of the date of this Agreement of thefollowing Contracts (including any waiver granted with respect to the materialterms of such Contracts) to which the Company is a party or by which the Company’sassets are bound (the Contracts listed on Schedule 4.20 that meet thedescriptions in this Section 4.20, being collectively, the “Material Contracts”):

(A)          each Contract under which it hasincurred, assumed or guaranteed any outstanding indebtedness for borrowedmoney, whether as borrower, lender or guarantor, in excess of $1,000,000 andall related security agreements or similar agreements granting Liens securingsuch indebtedness for borrowed money;

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(B)           Contracts containing covenantslimiting the freedom of the Companies to engage in any line of business orcompete with any Person or operate in any geographic location;

(C)           Any Contract pending for theacquisition or disposition, directly or indirectly (by merger or otherwise) ofany of the Capital Stock of the Companies;

(D)          Any Contracts between the Companies,on one hand, and the Seller or any Non-Company Affiliate on the other hand;

(E)           Contracts relating to the licensingof Intellectual Property (other than the Excluded Items) having an annual fee ofat least $100,000, but specifically excluding any licensing agreementsgenerally available, off-the-shelf or non-customized software; and

(F)           Any (1) employment Contract orconsulting contract with a natural person, in each case requiring annualcompensation (including base salary, bonuses and benefits) in excess of$600,000, and (2) any employee, officer or director indemnificationContract (other than any Charter Documents), and in the case of clauses (1) and(2) excluding all Contracts relating to the Incentive Plan Payment Amountor the Deferred Incentive Plan Amount.

(b)           The Companies have provided Buyerwith, or access to, copies of all Material Contracts, as amended through thedate of this Agreement.

(c)           The Companies are not in breach ordefault under any Material Contract.

(d)           To the Knowledge of Seller, there areno legally binding oral contracts (other than oral contracts relating to orassociated with the Marketing and Trading Transactions, such as oralconfirmations) to which any Company is a party.

                4.21        No Conflicting Contracts. Neither Seller nor any of itsAffiliates is a party to any Contract or conducts any business, in each casethat would reasonably be expected to cause a delay or refusal in anyGovernmental Authority’s granting of a Buyer Approval or a Seller Approval, andneither Seller nor any of its Affiliates has any plans to enter into any suchContract or conduct any such business.

                4.22        Trading. The Companies have established risk parameters, limits andguidelines in compliance with the Risk Management Policies to restrict thelevel of risk that the Companies are authorized to take with respect to the netposition resulting from the physical and financial commodity transactions,exchange-traded futures and options transactions, over-the-counter transactionsand derivatives thereof and similar transactions.

                4.23        TRS Agreement. The TRS Agreement is a “swap agreement” as such term isdefined in the Bankruptcy Code.

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ARTICLEV
REPRESENTATIONS AND WARRANTIES OF BUYER

Buyer herebyrepresents and warrants to Seller that:

                5.1          Organization. Each of Buyer and each of its Affiliates that is a party toan Ancillary Agreement is duly organized and validly existing under the Laws ofits jurisdiction of organization.

                5.2          Authority. Each of Buyer and each of its Affiliates that is a party toany Ancillary Agreement has all requisite corporate power and authority toexecute and deliver this Agreement and the Ancillary Agreements, as applicable,to which it is or will be a party and to perform its obligations hereunder andthereunder, as applicable. The execution and delivery by Buyer, and each of itsAffiliates that is a party to any Ancillary Agreement, of this Agreement andthe Ancillary Agreements to which it is or will be a party, and the performanceby Buyer and such Affiliate of its obligations hereunder and thereunder, asapplicable, have been duly and validly authorized by all necessary corporate,partnership or company action. This Agreement and the Ancillary Agreements towhich it is or will be a party have been, or when executed will have been, dulyand validly executed and delivered by Buyer and such Affiliate, and thisAgreement and the Ancillary Agreements to which it is or will be a partyconstitute, or when executed will constitute, the legal, valid and bindingobligation of Buyer or such Affiliate, as applicable, enforceable against Buyeror such Affiliate, as applicable, in accordance with their terms, except as thesame may be limited by bankruptcy, insolvency, reorganization, fraudulentconveyance, arrangement, moratorium or other similar Laws relating to oraffecting the rights of creditors generally, or by general equitable principles

                5.3          No Conflicts. The execution and delivery by each of Buyer, and each of itsAffiliates that is a party to an Ancillary Agreement, of this Agreement and theAncillary Agreements, as applicable, to which it is or will be a party, and theperformance by Buyer or such Affiliate of its obligations hereunder andthereunder do not:

(a)           violate or result in a breach of theCharter Documents of Buyer or such Affiliate;

(b)           violate, breach or result in adefault under any Contract to which Buyer or such Affiliate is a party, exceptfor any such violations, breaches or defaults that would not reasonably be expectedto result in a material adverse effect on Buyer’s ability to perform itsobligations hereunder;

(c)           assuming all required filings,waivers, approvals, consents, authorizations and notices set forth in Schedule5.3 (collectively, the “Buyer Approvals”) and other customary notificationsprovided in connection with the consummation with the transaction contemplatedby this Agreement have been made, given, or obtained (i) violate or resultin a breach of any Law applicable to Buyer or such Affiliate or (ii) requireany consent or approval of any Governmental Authority under any Law applicableto Buyer or such Affiliate, except such violations, breaches, consents orapprovals that would not reasonably be expected to result in a material adverseeffect on Buyer’s and such Affiliates’, taken as whole, ability to perform itsobligations hereunder.

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                5.4          Legal Proceedings. (a) There are noProceedings pending or, to Buyer’s Knowledge, threatened against Buyer beforeor by any Governmental Authority that would reasonably be expected to have amaterial and adverse effect on the ability of Buyer to enter into and performits obligations under this Agreement and (b) there are no unsatisfiedjudgments or open injunctions binding upon Buyer that would reasonably be expectedto have a material adverse effect on the consummation of the transactionscontemplated by this Agreement. Neither Buyer nor any of its Affiliates issubject to any supervisory actions by federal bank regulatory authorities under12 USC 1818(b).

                5.5          Brokers’ Fees. No broker, finder, investment banker or other Person isentitled to any brokerage fee, finders’ fee or other commission with respect tothe transactions contemplated by this Agreement based upon arrangements made byBuyer or any of its Affiliates except for fees that will be paid by Buyer orits Affiliates.

                5.6          Acquisition as Investment. Buyer is acquiring the PurchasedInterests for its own account as an investment without the present intent tosell, transfer or otherwise distribute the same to any other Person. Buyer hasmade, independently and without reliance on Seller (except to the extent thatBuyer has relied on the representation and warranties of Seller in thisAgreement), its own analysis of the Purchased Interests, the Companies, theAssigned Contracts, the Transactions and the associated Contracts, assets andemployees for the purpose of entering into this Agreement and consummating thetransactions contemplated by this Agreement, and Buyer has had reasonable andsufficient access to documents, other information and materials as it considersappropriate to make its evaluations. Buyer acknowledges that the PurchasedInterests are not registered pursuant to the Securities Act of 1933 (the “1933 Act”) and that none of thePurchased Interests may be transferred, except pursuant to an applicableexception under the 1933 Act. Buyer is an “accredited investor” as definedunder Rule 501 promulgated under the 1933 Act.

                5.7          Financial Resources. Buyer has and, at Closing, willhave sufficient cash on hand to enable it to purchase the Purchased Interestsand satisfy the other obligations of Buyer under this Agreement on the termshereof.

                5.8          No Conflicting Contracts. Neither Buyer nor any of itsAffiliates is a party to any Contract or conducts any business, in each casethat would reasonably be expected to cause a delay or refusal in anyGovernmental Authority’s granting of a Buyer Approval or a Seller Approval, andneither Buyer nor any of its Affiliates has any plans to enter into any such Contractor conduct any such business. Buyer is a “well capitalized” organization withinthe meaning of 12 CFR 225.2(r) and is a “well managed” organization withinthe meaning of 12 CFR 225.2(s).

                5.9          Opportunity for Independent Investigation. Prior to its execution of thisAgreement, Buyer has conducted to its satisfaction an independent investigationand verification of the current condition, assets and affairs of the Companies,the Affiliate Contracts, the Purchased Interests, the Transactions and the Contractsassociated therewith, and the assets and employees associated with theCompanies. In making its decision to execute this Agreement and the AncillaryAgreements to which it is, or will be, a party and consummate the transactionscontemplated hereby or thereby, Buyer has relied and will rely solely upon theresults of such

 

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independentinvestigation and verification and the terms and conditions of this Agreement,including the Schedules.

                5.10        Federal Reserve Board Filing. On or prior to the Signing Date,Buyer has filed with the Federal Reserve Board its application for approval under Section 4 of the Bank Holding Company Actand Regulation Y to permit Buyer to expand its scope of permitted activities toengage in physical commodity trading in the United States.

ARTICLEVI
COVENANTS

TheParties hereby covenant and agree as follows:

                6.1          Novation and Assignment of CG&E Transactions. From the Signing Date throughthe first date on which all CG&E Transactions have been assigned or novatedto CMT or have expired or terminated:

(a)           Cooperation of Parties:  Buyer agrees to use its commerciallyreasonable efforts (and to cooperate and provide Seller, CMT and CG&E withreasonable assistance) to cause, subject to the receipt of any applicableRequired ISO/RTO Membership for CMT, the novation (or, with the consent ofSeller or CG&E, the assignment) of the CG&E Transactions from CG&Eto CMT (with a goal of achieving a CG&E Transferred Percentage of at least95% by October 15, 2006) and to obtain any requisite regulatory and anyrequisite Counterparty consents (and, if needed, the consent of any Personproviding credit support on behalf of such Counterparty) so that (i) allright, title and interest of CG&E with respect to the applicable CG&ETransaction for periods accruing from and after Closing (other than accountsreceivable relating to amounts arising under the CG&E Transactions prior tothe Closing) shall be novated or assigned to CMT, provided that any transferrequiring prior approval from a Governmental Authority shall be subject to thereceipt or waiver of such approval from such Governmental Authority, (ii) allliabilities and obligations of CG&E and any Duke Credit Support Providerarising out of or relating to such CG&E Transaction for periods accruing fromand after Closing (regardless of the nature of such liabilities) shall in thecase of an assignment be assumed by CMT and in all cases such obligations andliabilities shall, effective as of Closing, be assumed or guarantied by Buyer(or if Buyer does not have the Required Rating, assumed or guarantied by aPerson with a Credit Rating at least equal to the Required Rating), (iii) eachCounterparty and any beneficiary of any Credit Support provided with respect tosuch CG&E Transaction shall provide a valid and binding written release ofCG&E and any Duke Credit Support Provider with respect to all liabilitiesand obligations of CG&E and any Duke Credit Support Provider arising out ofor relating to such CG&E Transaction for periods accruing from and afterClosing (regardless of the nature of such liabilities), and (iv) any itemsof Credit Support being posted by a Duke Credit Support Provider with respectto such CG&E Transaction are returned to the applicable Person. It beingunderstood that Seller, CG&E and each Duke Credit Support Provider areentitled to require that terms substantially similar to those set forth initems (i) through (vi) above are contained in each CG&E NovationAgreement and each CG&E Assignment Agreement. Seller agrees to (and to causeCG&E and, prior to Closing, CMT to) use commercially reasonable efforts tocooperate with and assist Buyer (and, after Closing, CMT) with the novation orassignment of such CG&E Transactions pursuant to this Section 6.1.

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Buyeragrees from and after Closing to cause CMT to use reasonably commercial effortsto cooperate with and assist Buyer, CG&E and Seller with respect to suchnovations or assignments. Upon the effective date of each such novation andassignment of such CG&E Transactions, the corresponding rights andobligations of CG&E and CMT under the TRS Agreement with respect to suchCG&E Transaction shall terminate, all in accordance with and subject to theterms and conditions of Section 2.2 of the TRS Agreement.

(b)           Process for Obtaining CounterpartyConsent. Buyer shall offer (or, when applicable, cause CMT to offer) toeach Counterparty to a CG&E Transaction promptly following the Signing Date(i) a form of cover letter and novation agreement (or with the consent ofSeller or CG&E, an assignment agreement) that (A) is substantially inthe form of Exhibit E (or, in the case of any assignment agreement,substantially in the form of Exhibit F), with such modifications, if any,thereto that have been mutually agreed to by Seller and Buyer acting reasonably,and (B) provides that CMT shall be the transferee or assignee, asapplicable, thereunder effective as of Closing, (ii) a guaranty to beeffective as of Closing, in form and substance reasonably satisfactory toSeller of all obligations under such CG&E Transaction issued by a Personwith Credit Ratings of at least the Required Rating, and (iii) if aCG&E Transaction is to be novated to CMT but CMT and the applicableCounterparty are not parties to a Master Agreement corresponding to the type ofMaster Agreement then in effect for such CG&E Transaction, a proposedMaster Agreement between CMT and such Counterparty of a type similar to thatgoverning such CG&E Transaction containing terms that are at least asfavorable in all respects (including terms, amount and conditions) to suchCounterparty as those existing on the earlier of (x) the date suchproposed Master Agreement is being offered and (y) the Closing andcontained in the corresponding Master Agreement that is to be replaced betweenCG&E and such Counterparty. Buyer agrees in connection with the novation orassignment of such CG&E Transaction (and its associated Contracts) pursuantto this Section 6.1: (A) to offer to and, effective as of Closing,accept from the Counterparty to such CG&E Transaction terms and conditions,and (B) to provide or cause CMT to receive credit support, effective as ofthe Closing, that, in the case of clauses (A) and (B) above, are atleast as favorable to such Counterparty as those contained in such CG&ETransaction (and its associated Contracts) on the earlier of (x) the datesuch credit support is being offered and (y) the Closing.

(c)           Progress Reports. Buyer shallprovide to Seller on the first and fifteenth day of each month (unless such dayis not a Business Day, in which case such report shall be delivered on theimmediately succeeding Business Day) a report substantially in the form of Exhibit Gshowing the status of the novation or assignment process with respect to eachCG&E Transaction broken out by Counterparty and type of Master Agreementand the actions that have been taken since the prior report and showing suchother information as may be reasonably requested by Seller and reasonablyavailable to Buyer.

(d)           Senior Management Involvement. If on the date that is thelater of the Closing Date and October 15, 2006, the quotient of (i) theabsolute value the expected gross cash flow of the CG&E Transactions (ineffect at the Closing) that have been novated or assigned to CMT in accordancewith this Agreement divided by (ii) the absolute value of the expectedgross cash flow of the CG&E Transactions (in effect at the Closing) (suchquotient being the “CG&ETransferred Percentage”) is less than 95%, then Buyer, on theone hand, and Seller, on the other hand, shall each nominate promptly (and inany event within five (5) Business Days after such

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date)an officer from their senior management, and such senior managementrepresentatives shall promptly thereafter meet (and shall thereafter continueto meet at agreed upon intervals) to in good faith devise and implementadditional commercially reasonable procedures of Buyer (including the use ofadditional personnel of Buyer) to cause the prompt novation, assignment ortermination of any remaining CG&E Transactions.

(e)           Option to Assign CG&ETransactions. Ifthe CG&E Transferred Percentage is less than 95% on December 15, 2006,then Seller shall have the option, in its sole discretion, at any time aftersuch date to unilaterally assign to CMT, or negotiate the termination of, anyCG&E Transaction (other than CG&E Transactions that are “Into CinergySeller’s Choice” Contracts) that has not been novated or assigned from CG&Eto CMT by such date.

(f)            Ability to Appoint CMT as Agentfor CG&E Transactions. Subjectto the receipt of any required approval from a Governmental Authority, theParties agree that CG&E shall have the right at any time after the ClosingDate to appoint CMT (or, with the consent of Buyer, another Affiliate of Buyer)as its agent with respect to the CG&E Transactions.

                6.2          Regulatory and Other Approvals.From the dateof this Agreement until Closing (the “Interim Period”):

(a)           The Parties shall (and shall causetheir respective Affiliates to) use commercially reasonable efforts to obtainas promptly as practicable all Seller Approvals, Company Consents and BuyerApprovals and all other material consents and approvals that any of Seller,Buyer or their respective Affiliates are required to obtain in order toconsummate the transactions contemplated hereby (including the novation and/orassignment of the CG&E Transactions to CMT).

(b)           The Parties shall, and shall causetheir respective Affiliates to, (i) make or cause to be made the filingsrequired of such party or any of its Affiliates under any Laws with respect tothe transactions contemplated by this Agreement and to pay any fees due of itin connection with such filings, as promptly as is reasonably practicable, (ii) cooperatewith the other Party and furnish the information in such Party’s possession thatis necessary in connection with such other Party’s filings, (iii) usecommercially reasonable efforts to cause the expiration of the notice orwaiting periods under any Laws with respect to the transactions contemplated bythis Agreement as promptly as is reasonably practicable, (iv) promptlyinform the other Party of any communication from or to, and any proposedunderstanding or agreement with, any Governmental Authority in respect of suchfilings, (v) reasonably consult and cooperate with the other Party inconnection with any analyses, appearances, presentations, memoranda, briefs,arguments and opinions made or submitted by or on behalf of any Party inconnection with all meetings, actions and proceedings with GovernmentalAuthorities relating to such filings, (vi) comply, as promptly as isreasonably practicable, with any requests received by such Party or any of itsAffiliates under any Laws for additional information, documents or othermaterials, (vii) use commercially reasonable efforts to resolve anyobjections as may be asserted by any Governmental Authority with respect to thetransactions contemplated by this Agreement and (viii) use commerciallyreasonable efforts to contest and resist any action or proceeding instituted(or threatened in writing to be instituted) by any Governmental Authoritychallenging the transactions contemplated by this Agreement as violative of anyLaw. If a Party intends to

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participatein any meeting with any Governmental Authority with respect to such filings andif permitted by, or acceptable to, the applicable Governmental Authorities, itshall give the other Party reasonable prior notice of, and an opportunity toparticipate in, such meeting.

(c)           In connection with any such filings,Buyer shall cooperate in good faith with Governmental Authorities and undertakepromptly any and all commercially reasonable actionrequired to complete lawfully the transactions contemplated by this Agreement;provided that nothing in this Section 6.2 shall require Buyer to make anydivestiture of any of its assets or any portion of its business.

(d)           The Parties shall provide promptnotification to each other when any such consent or approval referred to inthis Section 6.2 is obtained, taken, made, given or denied, as applicable.

(e)           In furtherance of the foregoingcovenants:

(i)                    EachParty shall prepare, as soon as is practical following the Signing Date, allnecessary filings in connection with the transactions contemplated by thisAgreement that may be required by FERC or the Federal Reserve Board, or underthe HSR Act, the Competition Act (Canada) or any other federal, state,provincial or local Laws. Each Party shall submit such filings as soon aspracticable, but in no event later than five (5) Business Days (subject toextension by mutual agreement) after the execution hereof for filings with theFERC for authorization of the transactions contemplated by this Agreement(including the TRS Agreement, the Transition Services Agreement and theServices Agreement) pursuant to Section 203 of the FPA. The Parties shallrequest expedited treatment of any such filings, shall promptly furnish eachother with copies of any notices, correspondence or other written communicationfrom the relevant Governmental Authority, shall promptly make any appropriateor necessary subsequent or supplemental filings and shall cooperate in thepreparation of such filings as is reasonably necessary and appropriate.

(ii)                   Buyerand Seller shall not, and shall each cause its respective Affiliates not to,take any action that could reasonably be expected to adversely affect theapproval of any Governmental Authority of any of the filings referred to inthis Section 6.2.

6.3          Access of Buyer and Seller. Duringthe Interim Period, Seller will provide Buyer and its authorizedRepresentatives with reasonable access, upon reasonable prior notice and duringnormal business hours, to the properties, books, Contracts, records andappropriate officers and employees of, or employees performing actions onbehalf of, the Companies, but only to the extent that such access (i) doesnot unreasonably interfere with the normal operation of the business of Selleror the Companies and (ii) isreasonably related to the requesting Party’s obligations and rights hereunder; provided, however, that Sellershall have the right to (A) have a Representative present for anycommunication with officers or employees of, or employees performing actions onbehalf of, the Companies and (B) impose reasonable restrictions andrequirements for safety purposes.  Additionally, Buyer shall hold in confidenceall such information on the terms and subject to the conditions contained inthe Confidentiality Agreement. Notwithstanding the foregoing, Buyer shall haveno right of access to, and Seller shall have no obligation to provide or causeeither of the Companies to provide to Buyer, any

39



informationthe disclosure of which (1) would jeopardize any privilege available tosuch Company, Seller, or any Non-Company Affiliate, (2)  would causesuch Company, Seller, or any Non-Company Affiliate to breach a confidentialityobligation or (3) would result in a violation of Law.

(b)           Buyer agrees to indemnify and holdharmless Seller, its Affiliates and their Representatives for any and allLosses incurred by Seller, its Affiliates or their Representatives arising outof the access rights under Section 6.3(a), including any claims by any ofBuyer’s Representatives for any injuries or property damage during such accessby Buyer to the property of the Companies or CG&E other than due to thegross negligence or willful misconduct of Seller and its Representatives.

(c)           For a period of eighteen (18) monthsfollowing Closing, Buyer agrees, upon reasonable prior notice from Seller andduring normal business hours, to provide to Seller and its Representativescopies of books and records of the Companies or relating to the Hired Employees(or, to the extent such copies are not available, reasonable access to thecopies and records of the Companies and the Hired Employees) solely to theextent relating to events that occurred prior to Closing and to the extentneeded for a legitimate business purpose as requested in reasonable detail inwriting by Seller, but only to the extent that such access or copies do notunreasonably interfere with the normal operation of the business of Buyer orthe Companies; provided, however, that Seller shall initiate nocontact under this Section 6.3 with the Hired Employees other than throughBuyer’s designated representatives and Buyer shall have (A) the right tohave a Representative present for any communication with employees or officersof the Companies and (B) the right to impose reasonable restrictions andrequirements for safety purposes. Additionally, Seller shall hold in confidenceall such information on the terms and subject to the conditions contained inthe Confidentiality Agreement to the same extent as such terms and conditionsapplied to Buyer. Notwithstanding the foregoing, Seller shall have no accessto, and Buyer shall have no obligation to provide or cause either of theCompanies to provide to Seller, any information the disclosure of which (1) wouldjeopardize any privilege available to such Company, Buyer or its Affiliates, (2)  wouldcause such Company, Buyer or its Affiliates to breach a confidentialityobligation or (3) would result in a violation of Law. Seller agrees toindemnify and hold harmless Buyer, its Affiliates and their Representatives forany and all Losses incurred by Buyer, its Affiliates or their Representativesarising out of the access rights under this Section 6.3, including anyclaims by any of Seller’s Representatives for any injuries or property damageduring such access by Seller to the property of the Companies other than due tothe gross negligence or willful misconduct of Buyer and its Representatives.

                6.4          Certain Restrictions.

(a)           During the Interim Period, except asset forth on Schedule 6.4, as contemplated by this Agreement or asconsented to in writing by Buyer (which consent shall not be unreasonablywithheld, conditioned or delayed), Seller shall cause the Companies and, withrespect to the CG&E Transactions only, CG&E to (i) operate in theordinary course of business and in compliance with the material provisions ofthe Risk Management Policies, (ii) use commercially reasonable efforts topreserve intact the business of the Companies and its relationship withmaterial customers and others having material business relationships with the

 

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Companies,(iii) use commercially reasonable efforts to maintain their tangibleproperties and facilities in good working order and condition, ordinary wearand tear excepted, and (iv) not to:

(A)          repurchase, redeem or otherwiseacquire any of the Capital Stock of the Companies;

(B)           amend or change the Charter Documentsof the Companies, liquidate, dissolve, or otherwise wind up the business of theCompanies or merge or consolidate the Companies with any other Person;

(C)           enter into any joint venture, partnershipor similar arrangements; provided thatfor purposes of clarification, energy management agreements, energy marketingagreements and Marketing and Trading Transactions shall not be considered jointventures, partnerships or similar arrangements for purposes of this clause (C);

(D)          fail to use commercially reasonableefforts to renew any permit necessary for the operation of the business of theCompanies;

(E)           make any new, or change any existing,material election with respect to Taxes of the Companies, other than withrespect to sales and use taxes filings;

(F)           except as may be required to meet therequirements of applicable Law or GAAP, change any accounting method orpractice of the Companies in a manner that is inconsistent with past practicein a way that would adversely affect the Companies or their business afterClosing;

(G)           authorize any capital expenditure ofthe Companies in excess of $2,000,000 other than in the ordinary course ofbusiness consistent with past practice or as needed in connection with theconsummation of the transactions contemplated by this Agreement;

(H)          grant any proxy with respect to thePurchased Interests or deposit any of the Purchased Interests into a votingtrust or enter into any voting agreement with respect to any of the PurchasedInterests;

(I)            make any loan of cash to any Person(other than a Company) other than (1) loans that will be repaid at orprior to Closing, (2) loans associated with Marketing and TradingTransactions, the Cornerstone Contracts or any Credit Support provided inconnection therewith or (3) loans to employees entered into in theordinary course of business consistent with past practice; provided that forpurposes of clarification in no event will any Marketing and TradingTransaction of a Company or the purchase or sale of any commodity by a Companybe deemed to be a loan under this clause (I);

(J)            incur any indebtedness for borrowedmoney other than (1) such indebtedness that will be repaid at or prior toClosing, (2) such indebtedness that will be (or that Seller, at itsoption, elects to be) treated as a current liability in Net Working Capital, (3) suchindebtedness associated with Marketing and Trading Transactions, theCornerstone Contracts or any Credit Support provided in connection therewith,or (4) such indebtedness

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relating toequipment used in the operations and business of the Companies incurred in theordinary course of business consistent with past practice; provided that forpurposes of clarification in no event will any Marketing and TradingTransaction of a Company or the purchase or sale of any commodity by a Companybe deemed to be the incurrence of indebtedness for borrowed money under thisclause (J);

(K)          enter into any employment agreement orany consulting agreement with a natural person, in each case that requiresannual compensation (including base salary, bonuses and benefits) in excess of$600,000

(L)           exercise any rights under Section 2of the Exclusivity Agreement dated September 20, 2005 by and between CMTand HNG LNG Ventures LLC, HNG Storage, LP and HNG LNG Ventures LP (as amendedor extended) to acquire any interest in the Project (as defined therein); or

(M)         commit to do any of the foregoing.

(b)           Notwithstanding the foregoing,nothing in the Agreements shall prevent either Company or CG&E from (i) takingcommercially reasonable actions with respect to emergency situations andregulatory requirements or other requirements of Law so long as Seller shall,upon receipt of notice of any such actions, promptly inform Buyer of any suchactions taken outside the ordinary course of business, (ii) taking actionsas are reasonably necessary to allow the Companies to operate their businesses(as currently conducted and after taking into account the transactionscontemplated by this Agreement) on a stand alone basis separate from Seller andthe Non-Company Affiliates, including actions to enable the Companies to enterinto Marketing and Trading Transactions with respect to power, coal, emissionsand firm transportation rights and including, at Seller’s option, terminating (A) Contractsbetween a Company and a Non-Company Affiliate or Contracts to which CG&E isa party and (B) any Marketing and Trading Transaction between CG&E anda third party associated with such Contracts described in clause (A), and (iii) takingany actions that would not reasonably be expected to adversely affect theCompanies after Closing.

                6.5          Migration Services. During the Interim Period,Seller shall provide or cause to be provided to the Companies the migrationservices described on Schedule 6.5 (the “Migration Services”) and shall usecommercially reasonable efforts to transfer to CMT or obtain on behalf of CMTlicenses for all third party Software used in the operations and business ofthe Companies (and the CG&E Transactions) as currently conducted (the “Third Party Software”).The Migration Services shall be performed in accordance with a written plan(the “Migration Plan”). Sellershall be responsible for preparing, revising and finalizing the Migration Planwithin ten (10) days following the Signing Date; provided that Sellershall cooperate and work closely with Buyer in developing the Migration Plan(including incorporating Buyer’s reasonable suggestions) and the Migration Planshall be subject to Buyer’s reasonable approval, such approval not beunreasonably withheld. Until Closing or the completion of the MigrationServices, whichever occurs first, Seller shall review with Buyer at least on aweekly basis, or as often as otherwise may be reasonably requested by Buyer,the status of the Migration Services. If the Migration Services are notsuccessfully completed as of the Closing Date, then the Migration Servicesshall be performed by Seller under the terms of the Transition Services

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Agreement andat Seller’s sole cost and expense to the extent specified in the TransitionServices Agreement. If the Seller has not successfully transferred to, orobtained on behalf of, CMT licenses to any Third Party Software as of theClosing Date, Seller shall continue (for a period of 90 days after the ClosingDate) to use commercially reasonable efforts to transfer to, or obtain onbehalf of, CMT such licenses at Seller’s sole cost and expense. For purposes ofclarification, the failure to complete the Migration Services and/or transferto (or obtain on behalf of) CMT the Third Party Software shall not delay orprevent Closing. If Seller has not successfully transferred to, or obtained onbehalf of, CMT licenses to any Third Party Software by the 90th day after theClosing Date, Buyer shall have the right to obtain a license to such ThirdParty Software and shall be entitled to indemnification from Seller for thereasonable cost thereof pursuant to Section 10.1(a)(vi).

                6.6          Use of Certain Names. Within forty-five (45) daysfollowing Closing, Buyer shall cause the Companies to cease using the words “Cinergy,”“CMT”, “CCI”, “Duke”, “Duke Energy”, and any word or expression similar theretoor constituting an abbreviation or extension thereof (the “SellerMarks”), including eliminating the Seller Marks from theproperty of the Companies and disposing of any unused stationery and literatureof the Companies bearing the Seller Marks, and thereafter, Buyer shall not, andshall cause the Companies and their Affiliates not to, use the Seller Marks orany logos, trademarks, trade names, trade dress or other similar IntellectualProperty rights belonging to Seller or any Affiliate thereof, and Buyeracknowledges that it, its Affiliates and the Companies have no rightswhatsoever to use the Seller Marks or related Intellectual Property. Notwithstandingthe foregoing, Buyer shall have seventy-five (75) days following Closing toeffect the changes in the name “CMT” as reflected in the market-based tariff onfile with the FERC. Without limiting the foregoing:

(a)           Within five (5) Business Daysafter the Closing Date, Buyer shall cause each Company whose name contains anyof the Seller Marks to change its name to a name that does not contain any ofthe Seller Marks.

(b)           Within forty-five (45) days after theClosing Date, Buyer shall provide evidence to Seller, in a format that isreasonably acceptable to Seller, that Buyer has made all governmental filingsrequired pursuant to clause (a) above and has provided notice to allapplicable Governmental Authorities and all counterparties to any materialContracts regarding the sale of the Companies to Buyer and the new addressesfor notice purposes.

                6.7          Support Obligations.

(a)           Buyer recognizes that certain of theNon-Company Affiliates have provided and/or will provide Credit Support (i) tothe Companies, (ii) with respect to the Affiliate Contracts, and/or (iii) withrespect to the CG&E Transactions pursuant to certain Credit Supportobligations (the “SupportObligations”).

(b)           Prior to Closing, Buyer shall usecommercially reasonable efforts to effect the full and unconditional release,effective as of the Closing, of the Non-Company Affiliates

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fromall Support Obligations, including by undertaking the following promptlyfollowing the Signing Date:

(i)                    offeringto each beneficiary thereof a guaranty from a Person with Credit Ratings atleast equal to the Required Rating to replace each existing guaranty that is aSupport Obligation, which shall contain terms at least as favorable to suchbeneficiary thereof in all respects (including terms, amount and conditions)than such existing guaranty (other than with respect to the credit rating ofthe guarantor); provided, that ifthe beneficiary of any existing guaranty does not accept such a replacementguaranty by the date that is ninety (90) days after the Signing Date (A) andthe terms of such existing guaranty or of any Contract or Law requiring suchexisting guaranty to be maintained permit the replacement of such existingguaranty with another form of credit support, Buyer will offer the beneficiaryof such existing guaranty such other form of credit support in order to obtainthe release of such existing guaranty or (B) if the terms of such existingguaranty or of any such Contract or Law requiring such existing guaranty to bemaintained do not so permit the replacement of such existing guaranty, Buyerwill offer to replace such existing guaranty with a Letter of Credit or cash inthe amount of such existing guaranty in substitution therefor;

(ii)                   furnishinga Letter of Credit to replace each existing letter of credit that is a SupportObligation (including all such letters of credit posted by or on behalf of anyDuke Credit Support Provider with respect to the Transactions) containing termsand conditions that are substantially identical to the terms and conditions ofsuch existing letter of credit;

(iii)                  institutingan escrow arrangement to replace each existing escrow arrangement that is aSupport Obligation with terms at least as favorable to the counterpartythereunder than the terms of such existing escrow arrangement;

(iv)                  postinga surety or performance bond to replace each existing surety or performancebond that is a Support Obligation issued by a Person having a net worth andCredit Rating at least equal to those of the issuer of such existing surety orperformance bond, and containing terms and conditions that are substantiallyidentical to the terms and conditions of such existing surety or performancebond;

(v)                   postingcash to replace any cash that is a Support Obligation provided by a Non-CompanyAffiliate; provided that Buyer shall have the option to offer a Letter ofCredit to replace such cash so long as such Letter of Credit is (A) non-recourseto Seller or any Non-Company Affiliate, (B) issued by Buyer in favor ofthe applicable Counterparty, (C) in a form acceptable to the applicableCounterparty and Buyer (with a copy of such form of such Letter of Creditprovided by Buyer to Seller prior to such Letter of Credit being offered to suchCounterparty) and (D) not reasonably expected to delay the consent of theapplicable Counterparty to the release of such Credit Support; and

(vi)                  replacingany other security agreement or arrangement on substantially identical termsand conditions to the existing security agreement or arrangement that is aSupport Obligation.

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(c)           Buyer shall use commerciallyreasonable efforts to cause the beneficiary or beneficiaries of the SupportObligations to (i) remit any cash to Seller or one of its Affiliates, asapplicable, held under any escrow arrangement that is a Support Obligationpromptly following the replacement of such escrow arrangement pursuant to Section 6.7(b)(iii) and(ii) terminate and redeliver to Seller or one of its Affiliates eachoriginal copy of each original guaranty, letter of credit or other instrumentconstituting or evidencing such Support Obligations; provided that if a partyis unable to return such item of Credit Support (in the form of guaranties,letters of credit or other instruments constituting or evidencing such SupportObligations (other than cash)) because such items of Credit Support cannot belocated after diligent efforts, then in lieu of returning such item of CreditSupport the party obligated to make such return may, with the consent of thePerson entitled to receive such Credit Support, provide an affidavit of lostguaranty, letter of credit or such other instrument, which shall contain anindemnity reasonably satisfactory to such receiving party and which shallacknowledge that such Credit Support is terminated and no further obligationsexist thereunder.

(d)           If Buyer is not successful, followingthe use of commercially reasonable efforts, in obtaining the complete andunconditional release of the Non-Company Affiliates from any SupportObligations as of Closing (each such Support Obligation, until such time assuch Support Obligation is released in accordance with this Section 6.7(d)(i),a “Continuing SupportObligation”), then:

(i)                    fromand after the Closing, Buyer shall use its commercially reasonable efforts toobtain promptly the full and unconditional release of Seller and theNon-Company Affiliates from each Continuing Support Obligation;

(ii)                   Buyershall indemnify Seller and the Non-Company Affiliates for any Losses incurredby it or the Non-Company Affiliates in connection with each Continuing SupportObligation;

(iii)                  Buyershall not, and shall cause the Companies not to, effect any amendments ormodifications or any other changes to the contracts or obligations to which anyof the Continuing Support Obligations relate, or to otherwise take any action,in each case that increases, extends or accelerates the liability of theNon-Company Affiliates under any Continuing Support Obligation, without Seller’sprior written consent; and

(e)           Until such time as allContinuing Support Obligations in the form of guaranties have been fully andunconditionally released in accordance with Section 6.7(d), Buyer shallpay to Seller or Seller’s designee on the last Business Day of each monthbeginning on the last Business Day of the three month anniversary of theClosing Date (each, a “PaymentDate”) a fee of 0.55% (on a per annum basis) on (i) themaximum aggregate exposure (determined solely by reference to the maximumamount that may be guaranteed under Continuing Support Obligations inaccordance with the terms thereof with respect to Continuing SupportObligations that are capped, and determined solely by reference to themark-to-market exposure thereunder with respect to Continuing SupportObligations that are not capped), calculated as of the 15th day of such monthin which the applicable Payment Date occurs, of the applicable Seller orNon-Company Affiliates providing such Continuing Support Obligations. Buyershall deliver to

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Selleron each Payment Date a listing of any releases of Continuing SupportObligations pursuant to Section 6.7(d) obtained since the priorPayment Date.

(f)            Notwithstanding anything in thisAgreement to the contrary, Seller and the Non-Company Affiliates may notterminate any Continuing Support Obligations at any time after the Closinguntil such Continuing Support Obligations terminate or expire by their terms orby consent of the applicable beneficiary or are replaced pursuant to this Section 6.7.

(g)           Buyer shall have the right to contactand have discussions with each beneficiary of a Support Obligation in order tosatisfy its obligations under this Section 6.7; provided, however, that Buyer shall give Seller prior noticebefore making any such contact and Seller shall have the right to be presentduring any such discussions.

(h)           From and after Closing, Buyer shallprovide or cause to be provided all Credit Support required to be provided withrespect to the CG&E Transactions pursuant to the terms of the TRSAgreement.

(i)            Promptly following the effectivedate of the termination or expiration in full of any Continuing SupportObligation in the form of a letter of credit (i) that was posted by a DukeCredit Support Provider on behalf of a Company (which, for purposes ofclarification, shall not include any Credit Support provided with respect tothe CG&E Transactions) and (ii) to the extent that such letter ofcredit was included in the calculation of the Credit Support Payment made byBuyer to Seller pursuant to Article II, Seller shall return to Buyer anamount of cash equal to the portion of the Credit Support Payment allocated tosuch letter of credit in the calculation thereof minus the amount of anydrawings made on such letter of credit on or after Closing and prior to thedate of the termination or expiration of such letter of credit.

                6.8          Excluded Items. Notwithstanding anything in thisAgreement to the contrary, Buyer and Seller agree that the Purchased Interestsshall exclude those items listed on Schedule 6.8 (collectively,the “Excluded Items”), Seller shall retain allbenefits and liabilities with respect to the Excluded Items, and Seller shall, prior to the Closing, cause the Companies to distribute, transfer or assign eachExcluded Item to Seller or a Non-Company Affiliate. With respect to theExcluded Item identified as item 1 on Schedule 6.8, Seller shall use itscommercially reasonable efforts (before and, if necessary, for a reasonableperiod after the Closing) to effect a release of CCI from any liabilitiesthereunder in connection with or following such distribution, transfer orassignment.

                6.9          Employee and Benefit Matters. (a) Seller shall provideBuyer as soon as practicable after the Signing Date and shall update asappropriate through the Closing Date a list of certain employees of Seller orits Non-Company Affiliates (the “Available Employees”) that Seller and itsAffiliates will make available to Buyer to discuss potential employment withBuyer (which discussions the Parties agree shall not violate Section 6.9(c)).In addition, Seller shall provide Buyer as soon as practicable after theSigning Date and shall update as appropriate until and through the Closing Datea list of the Affiliates of Seller which employ each such employee. As requestedby Buyer and within five (5) BusinessDays of any such request following the Signing Date, Seller will provide toBuyer (i) to the extent permitted by any applicable Contract and Laws,aggregated employee information (with ranges and averages) as described inBuyer’s

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requestrelating to employee compensation and benefits of the Available Employees and (ii) tothe extent permitted by any applicable Contract and Laws, specific informationas described in Buyer’s request relating to each Available Employee as of aspecified date regarding such employee’s name, salary, job title and worklocation for the sole purpose of assisting Buyer to comply with this Agreementand to evaluate Available Employees for potential employment, and for no otherpurpose. Buyer agrees that such information shall be maintained in aconfidential manner and shall be made available only to those with a businessneed-to-know the information, and that Buyer shall have sole responsibility forits selection decisions of new employees without any other input or involvementin any manner from Seller. Buyer is not obligated to hire any AvailableEmployee but may interview all Available Employees. It is understood and agreedthat (i) Buyer’s expressed intention to extend offers of employment as setforth in this Section shall not constitute any commitment, Contract orunderstanding (expressed or implied) of any obligation on the part of Buyer toa post-Closing employment relationship of any fixed term or duration or uponany terms or conditions other than those that Buyer may establish pursuant toindividual offers of employment, and (ii) employment offered by Buyer is “atwill” and may be terminated by Buyer or by an employee at any time for anyreason (subject to any written commitments to the contrary made by Buyer or anemployee and applicable requirements of law).

(b)           Within sixty (60) days after theSigning Date, Buyer shall make offers of employment to each of the AvailableEmployees that Buyer desires to employ after Closing and such offer shallinclude terms and provisions that are consistent with the provisions of this Section 6.9,as reasonably determined by Buyer. Within sixty (60) days after the SigningDate, Buyer shall provide Seller with a list of the Available Employees to whomit has made offers of employment. Within seventy-five (75) days after theSigning Date (and in no event later than three (3) Business Days prior toClosing), Buyer shall notify Seller as to each Available Employee who hasaccepted employment with Buyer or any of its Affiliates (each a “Continued Employee”),which acceptance may be conditioned upon the occurrence of the Closing andother typical hiring policies, and each Available Employee who has rejectedBuyer’s offer of employment. Buyer shall indemnify and hold harmless Seller andits Affiliates with respect to all claims and liabilities directly relating toor arising out of Buyer’s employee selection and employment offer processdescribed in this Section 6.9(b) (including any claim of discriminationor other illegality in such selection and offer process, except for any claimsof illegality by Seller or its Affiliates in identifying the AvailableEmployees eligible for potential employment with Buyer under Section 6.9(a)).As soon as administratively practicable after Buyer provides Seller with a listof the Continued Employees in accordance with this Section 6.9(b), Sellershall provide to Buyer as reasonably requested by Buyer, with respect to eachContinued Employee on such list and subject to the consent of any such employeethat Seller determines is required by Law, information as of a specified dateregarding such employee’s current base salary or wages, hire date, andvacation, personal time and other compensation accrual to the extent such informationhas not previously been provided by Seller to Buyer. The employment with Buyeror an Affiliate of Buyer of each Continued Employee shall be effective as ofthe Closing Date; provided, however, that with respect to a Continued Employeewho is not actively at work on the Closing Date because he or she is on a leaveof absence approved by the Seller or the Affiliate employing such ContinuedEmployee immediately prior the Closing Date, the employment by Buyer or anAffiliate of Buyer of such Continued Employee shall be effective as of a datemutually agreed upon by Buyer (or Buyer’s Affiliate) and such ContinuedEmployee, provided

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thatthe Continued Employee is available to actively work for Buyer or an Affiliateof Buyer as of such date. Each Continued Employee who becomes employed by Buyeror an Affiliate of Buyer in accordance with the foregoing provisions of this Section 6.9(b) ishereinafter referred to as a “Hired Employee”, and the date on which such HiredEmployee becomes an employee of the Buyer or an Affiliate of Buyer ishereinafter referred to as such employee’s “Hire Date”. Nothing in the foregoingshall affect the right of Seller, or any Affiliate of Seller, to terminate theemployment of an Available Employee for any reason or at any time.  In no event shall the terms “AvailableEmployees” or “Continued Employees” or “Hired Employees” as used in thisAgreement be deemed to refer to Canadian Employees.

(c)           Buyer agrees that for the one-yearperiod following the Closing Date or the date of termination of this Agreementpursuant to Section 9.1, whichever is applicable, it will not employ, andwill cause its Affiliates not to employ, any employees or contractors of theSeller or its Affiliates (other than the hiring of the Available Employees inaccordance with Section 6.9(b)) without Seller’s prior written consent andthat neither the Buyer nor any of its Affiliates will, directly or indirectly,in any manner whatsoever, solicit for hire or employment any officer, employeeor contractor of the Seller or any of its Affiliates whom Buyer or itsAffiliates learned of in connection with the acquisition contemplated hereby(other than as provided in Section 6.9(b)) for the one-year periodfollowing the Closing Date or the date of termination of this Agreementpursuant to Section 9.1; provided,however, that this sentence shall not apply to any solicitation (orany hiring as a result of any solicitation) that consists of advertising in anewspaper or periodical of general circulation or through the Internet andshall further not apply to any unsolicited attempt by any such employee orcontractor to secure an employment relationship with the Buyer. Seller agrees,if the Closing occurs, for the one-year period following the Closing Date, thatit will not employ, and will cause its Affiliates not to employ, any of theHired Employees without Buyer’s prior written consent and that neither theSeller nor any of its Affiliates will, directly or indirectly, in any mannerwhatsoever, solicit for hire or employment any of the Hired Employees for theone-year period following the Closing Date; provided,however, that this sentence shall not apply to any solicitation (orany hiring as a result of any solicitation) that consists of advertising in anewspaper or periodical of general circulation or through the Internet andshall further not apply to any unsolicited attempt by any such employee tosecure an employment relationship with the Seller.

(d)           Effective as of the Closing Date (or,if later, effective as of the Hire Date with respect to those ContinuedEmployees who are on an approved leave of absence on the Closing Date) theHired Employees shall cease to participate in all Benefit Plans (except for theRetention Plan and except for the payments described in Section 6.9(n)) ofSeller or its Affiliates providing benefits to any of the Hired Employees (the “Seller Plans” or a “Seller Plan” as applicable). Without limitingthe generality of the foregoing, Seller or its respective Affiliates shall beresponsible for the payment of all amounts due to Hired Employees under the “DukeEnergy Americas Annual Incentive Target Plan”. Except as specifically providedherein, Buyer shall not assume any of the Seller Plans, and Seller or itsAffiliates shall retain all liabilities and obligations with respect to all ofthe Seller Plans. Except as specifically provided otherwise herein, neither theBuyer, the Companies, nor any of their Affiliates shall have any liability orobligation relating to any Hired Employee, Continued Employee or AvailableEmployee with respect to periods prior to the Closing Date.

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(e)           From and after the Closing Date,Buyer shall cause each Hired Employee to be provided with compensation andbenefits on a basis substantially similar to those provided to similarlysituated employees of Buyer and its Affiliates; provided, however, that if the employment of any HiredEmployee is terminated by Buyer or an Affiliate of Buyer for a reason otherthan “cause”, as such term is defined below, within one year after the HiredEmployee’s Hire Date, then Buyer shall provide such Hired Employee withseverance benefits at least equal to the severance benefits set forth in a listdelivered to Buyer by Seller on the Signing Date and which may be updated bySeller before the Closing Date as appropriate to add additional employees whobecame Available Employees after the Signing Date; and, provided further, thatif a Hired Employee is subject to an employment agreement with Buyer or anAffiliate of Buyer that provides severance benefits to such Hired Employee,then such Hired Employee will be entitled to only those severance benefitsprovided under the employment agreement unless such employment agreementspecifically provides otherwise. For purposes of this Section 6.9(e), “cause”means:  (i) the willful andcontinued failure, refusal or neglect by the employee to substantially performhis or her duties and obligations; (ii) gross misconduct by the employee,including without limitation, gross insubordination, in respect to the dutiesor obligations of the employee; (iii) any intentional or negligent act bythe employee having the effect of materially injuring the business orreputation of Buyer, or any of its Affiliates, and which causes economic harmto any such entity; or (iv) the employee’s conviction, plea of nolo contendre, or deferred adjudicationfor a felony or misdemeanor involving moral turpitude. Notwithstanding theforegoing, Buyer shall cause each Hired Employee and his or her eligibledependents (including all such Hired Employee’s dependents covered immediatelyprior to the Closing Date by a group health plan maintained by Seller or anAffiliate of Seller) to be eligible to be covered under a group health planmaintained by Buyer or an Affiliate of Buyer that (1) provides majormedical and dental benefits coverages to the Hired Employee and such eligibledependents effective immediately upon the Closing Date and (2) creditssuch Hired Employee, for the year during which such coverage under such grouphealth plan begins, with any deductibles and co-payments already incurredduring such year under a group health plan maintained by Seller or an Affiliateof Seller; provided, however, thatif credit for deductibles and co-payments is not permitted by the insurer forthe Buyer’s group health plan, then Buyer shall reimburse the Hired Employeefor the duplicative cost of deductibles and co-payments incurred by the HiredEmployee; and provided furtherthat for purposes of applying this clause (2) with respect to any HiredEmployee, the Hired Employee shall be responsible for providing the necessaryinformation to Buyer based on explanation of benefit forms received by theHired Employee from the group health plan maintained by Seller or an Affiliateof Seller. From and after the Closing Date, Buyer shall (and shall cause theCompanies and their respective Affiliates, as the case may be to) recognizeeach Hired Employee’s years of company service prior to the Closing Date withSeller and its Affiliates and any other Person that was acquired by Seller oran Affiliate of Seller (whether through purchase, merger or other combination)for purposes of terms of employment, compensation and eligibility, vesting orother benefit/coverage eligibility, benefit accrual and benefit determinationunder all employee benefit and compensation plans and programs maintained afterthe Closing by Buyer, the Companies, and their respective Affiliates in whichsuch Hired Employee is permitted to participate (other than for benefit accrualpurposes under any defined benefit pension plan), including paid vacation, paidsick time and severance benefits except for Buyer’s medical flexible spendingaccount plan, and except for Buyer’s long-term disability plan, to the extentsuch service crediting is inconsistent with the terms of Buyer’s long-

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termdisability plan. Buyer shall cause each employee welfare benefit plan orprogram sponsored by Buyer or an Affiliate of Buyer that the Hired Employeesmay be eligible to participate in on or after the Closing Date to waive anypreexisting condition exclusion or restriction with respect to participationand coverage requirements applicable to such Hired Employees. From and afterthe Closing Date, Buyer shall (and shall cause the Companies and theirrespective Affiliates, as the case may be to) recognize and give each HiredEmployee credit for his or her accumulated personal time (but not in excess oftwenty (20) days) as of theClosing Date under the personal time program maintained by Seller and itsAffiliates, which accumulated personal time is set forth on a list delivered bySeller to Buyer on the Signing Date and which may be updated by Seller beforethe Closing Date as appropriate to reflect additional accruals of such time forthe period between the Signing Date and the Closing Date and to add additionalemployees who became Available Employees after the Signing Date.

(f)            Claims of Hired Employees and theireligible beneficiaries and dependents for medical, dental, prescription drug,life insurance or other welfare benefits (“Welfare Benefits”) (other than disabilitybenefits) that are incurred before the Hire Date of such Hired Employee (and tothe extent a Hired Employee elects to continue to be covered by a Seller Planin accordance with Code section 4980B, on and after the Hire Date, claims underthe applicable Seller’s Plan for the period during which such Hired Employee iscovered by the applicable Seller’s Plan pursuant to such section 4980Belection) shall be the sole responsibility of Seller and the Seller Plans. Exceptas described in the preceding sentence, claims of Hired Employees and theireligible beneficiaries and dependents for Welfare Benefits (other thandisability benefits) that are incurred from and after the Hire Date of suchHired Employees shall be the sole responsibility of Buyer and its Affiliates. Forpurposes of this paragraph, a medical/dental claim shall be considered incurredon the date when the medical/dental services are rendered or medical/dentalsupplies are provided, and not when the condition arose or when the course oftreatment began. Claims of individuals receiving long-term disability benefitsunder a Seller Plan as of the Closing Date shall be the sole responsibility ofSeller and the Seller Plans. Claims made by the Hired Employees and theireligible beneficiaries and dependents for short-term or long-term disabilitybenefits from and after the Closing Date shall be the sole responsibility ofBuyer and its Affiliates (without regard to whether the circumstances givingrise to such claim occurred before, on or after the Closing Date).

(g)           All claims for health care anddependent care flexible spending account benefits submitted after the Hire Datefor expenses incurred prior to the Hire Date (and to the extent a HiredEmployee elects to continue to be covered by a Seller Plan in accordance withCode section 4980B, for expenses incurred on and after the Hire Date for theperiod during which such Hired Employer continues to be covered by Seller’sPlan pursuant to such section 4980B election) by Hired Employees shall be paidby Seller’s or its Affiliates’ health care and dependent care flexible spendingaccount plan to the extent permitted in accordance with the terms of such plan.

(h)           Claims for workers’ compensationbenefits for Hired Employees arising out of injuries or illnesses occurringprior to their respective Hire Dates shall be the responsibility of Seller. Claimsfor workers’ compensation benefits for Hired Employees arising out of injuriesor illnesses occurring on or after their respective Hire Dates shall be theresponsibility of Buyer.

 

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(i)            Notwithstanding anything to thecontrary in this Section 6.9, Buyer shall have the right to use anAffiliate of Buyer as operator to hire Available Employees and to performcertain actions on behalf of Buyer under this Section 6.9, provided thatin no event will such use of or performance by an Affiliate release Buyer fromany of its obligations under this Section 6.9. Further, to the extent thatBuyer uses an Affiliate for hiring purposes, Buyer shall require such Affiliateto comply with all obligations arising from this Agreement or applicable lawrelating to the confidentiality and privacy of information of the AvailableEmployees.

(j)            Upon the request of Buyer, Sellershall obtain the written resignation of any Hired Employee from anydirectorship or officer position with any of the Companies effective as of theClosing Date. Nothing herein shall preclude Seller from obtaining employmentresignations without Buyer’s consent.

(k)           Buyer will recognize, and will causeCCI to continue to recognize, all service of the Canadian Employees with CCI orits Affiliates accrued prior to the Closing Date for all purposes of theemployment or termination of employment of the Canadian Employees and under anyCanadian Employee Benefit Plan and for purposes of eligibility forparticipation in any compensation or benefit plan instituted by CCI or Buyerfor the benefit of the Canadian Employees following Closing. Buyer willmaintain, or cause CCI to maintain, in full force and effect the CanadianEmployee Benefit Plans for the benefit of the Canadian Employees for a periodof one (1) year following the Closing Date, on terms at least as favorableto the Canadian Employees as provided under such plans prior to Closing. Sellershall have no liability for severance or other damages to any such CanadianEmployee and Buyer shall indemnify, defend and hold the Seller IndemnifiedParties harmless in respect thereof in accordance with the provisions of Section 10.1(b).Seller and Buyer agree that each of them shall use and disclose any personalinformation that comprises part of the documents and the schedules referred toin Sections 4.13 or 4.14 and any other personal information that comprises partof the Purchased Interests only for those purposes for which the personalinformation was initially collected from or in respect of the individuals. Nothingin this Section 6.9 shall be construed so as to restrict either Party fromobtaining consent of an individual to the collection, use or disclosure ofpersonal information about the individual for purposes that are beyond thepurposes for which the information was initially collected.

(l)            Nothing in this Agreement shallaffect the right of Seller or any other Affiliate of Seller  to terminatethe employment of an Available Employee or Canadian Employee for any reason orat any time prior to Closing Date. This Section 6.9 shall not be construedto alter the at-will status of any Available Employee or otherwise interferewith any rights of either Seller, the Available Employees or the CanadianEmployees to sever the employment relationship. Nothing in this Agreement shallbe deemed to prevent or restrict in any way the right of Buyer after theClosing to terminate, reassign, promote or demote any of the Hired Employees orto change adversely or favorably the title, powers, duties, responsibilities,functions, locations, salaries, other compensation or terms or conditions ofemployment of such employees.

(m)          Notwithstanding any other provision ofthis Agreement to the contrary, Buyer will incur no liability under or withrespect to the Retention Plan; provided,however, that if, following theClosing Date, a Hired Employee’s employment with the Buyer is terminated for

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anyreason prior to the end of the month following that date which is three monthsafter the Closing Date, Buyer will promptly notify Seller of such HiredEmployee’s termination of employment and provide Seller with such informationregarding the circumstances of such termination as Seller may reasonablyrequest to the extent that Buyer is permitted to provide such information underapplicable Laws. Except as provided in Section 6.9(n), Buyer will notassume, and will have no obligations under or with respect to, any employmentagreements or employment offer letters with any Available Employee and Selleror any of its Affiliates.

(n)           Seller shall pay or cause anAffiliate of Seller to pay at or promptly following Closing to the HiredEmployees annual bonuses for 2006 at least equal to the aggregate amount of theIncentive Plan Payment Amount. In addition, Buyer shall assume and pay or causean Affiliate of Buyer to assume and pay to each Hired Employee during March of2007 the portion of the Deferred Incentive Plan Amounts that is payable to suchHired Employee pursuant to the terms of the Incentive Plan and in accordancewith information Seller shall provide to Buyer regarding the portion of suchDeferred Incentive Plan Amount that is payable to such Hired Employee as setforth in a list under the heading “Deferred 2005 Bonus Amounts” to be deliveredby Seller to Buyer on the Signing Date. Except as otherwise described in this Section 6.9(n),Buyer will not assume, and will have no obligations or rights under or withrespect to, the Incentive Plan. Buyer will not assume, and will have no rightsor obligations under or with respect to, letter agreements or similar writtencommitments or arrangements between any Hired Employee and Seller or any of itsNon-Company Affiliates, except that, with respect to such letter agreements orsimilar written commitments or arrangements, Buyer shall pay or cause anAffiliate of Buyer to pay to each Hired Employee, at the times and in the formsas set forth in the applicable letter agreements or written commitments orarrangements (including those entered into by the Seller or any such Affiliateafter the Signing Date and prior to Closing), the portion of the DeferredIncentive Plan Amount described in clause (ii) of the definition thereofthat is payable to such Hired Employee pursuant to the terms of such applicableletter agreement or written commitment or arrangement providing for suchpayments, and in accordance with the information regarding the Hired Employeesand the amounts payable with respect to such letter agreements or writtencommitments or arrangements contained in a list under the heading “OtherDeferred Amounts” to be delivered by Seller to Buyer on the Signing Date. Buyeragrees to withhold or to cause an Affiliate of Buyer to withhold from theamounts paid by Buyer or such Affiliate of Buyer to Hired Employees pursuant tothis paragraph all applicable taxes required to be withheld from such amountsand to pay employer employment tax obligations with respect to such amounts andremit such tax withholdings and tax payments to the applicable tax agencies andauthorities in accordance with applicable tax laws.

(o)           Upon the terms and subject to theconditions set forth in this Agreement, Buyer and Seller each agree to usecommercially reasonable efforts to take, or cause to be taken, all actions, andto do, or cause to be done, and to assist and cooperate with each other indoing, all things necessary, proper or advisable to carry out the provisions ofthis Section 6.9 and other provisions of this Agreement relating toemployees and employee benefit plans and arrangements and Seller shall promptlyprovide Buyer with such information regarding Available Employees as Buyershall reasonably request to exercise its rights under this Section 6.9 andto carry out its obligations under this Section 6.9 and this Agreement. Buyershall have the right to review in advance, and to the extent practicable theparties will consult with each other on, any communications with or informationprovided to Available Employees with respect

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totheir employment or possible employment with Buyer and the transactionscontemplated by this Agreement. In order to permit Seller to make the paymentsrequired pursuant to this Section 6.9, or any other payments, Buyer shall (i) notifySeller within three (3) Business Days after the employment of any HiredEmployee terminates, which notice shall specify whether the Hired Employeeterminated employment voluntarily or involuntarily, (ii) if suchtermination occurred involuntarily, the Buyer shall provide Seller with suchadditional information as the Seller shall reasonably request in order to allowit to determine whether the Hired Employee is entitled to payments as describedin this Section 6.9 as a result of such termination and (iii) providesuch additional information as is reasonably requested by Seller to enable itto determine whether a Hired Employee is entitled to payments from Seller andits Affiliates, provided in the case of clause (ii) or (iii) thatBuyer is permitted to provide the requested information in accordance withapplicable Laws.

(p)           Notwithstanding any other provisionof this Agreement, nothing shall prevent Seller or its Affiliates from amending(after obtaining the consent of any Hired Employee, if necessary) any BenefitPlan and any other agreement or plan referenced in this Section 6.9.,except to the extent any such amendment would increase the amounts payable byBuyer or its Affiliates hereunder.

                6.10        Termination of Certain Services andContracts. Notwithstandinganything in this Agreement to the contrary, prior to the Closing, Seller shall (i) terminate,sever, or assign to Seller or a Non-Company Affiliate effective upon or beforethe Closing any services provided to any of the Companies by Seller or aNon-Company Affiliate, including the termination or severance of insurancepolicies, Tax services, legal services and banking services (including theseverance of any centralized clearance accounts), (ii) use commerciallyreasonable efforts to terminate or assign to Seller or a Non-Company Affiliateeach Contract listed on Schedule 6.10, and (iii) cause all Claimsor obligations (contingent or otherwise) between a Company, on one hand, andSeller or any Non-Company Affiliate, on the other, to be released effectiveimmediately prior to Closing (collectively such Contracts listed, the “Terminated Contracts”).

6.11        Intercompany Indebtedness; Distributions.Notwithstandinganything in this Agreement to the contrary:

(a)           Seller shall cause any and allindebtedness for borrowed money between a Company, on the one hand, and aNon-Company Affiliate, on the other hand, to be paid in full.

(b)           Seller shall have the right on orprior to Closing (i) to cause the Companies to pay dividends and makedistributions with respect to the Capital Stock of the Companies and (ii) tomake or cause to be made contributions to the Companies.

                6.12        Transfer Taxes. Notwithstanding anything in this Agreement to the contrary,Seller and Buyer shall each pay any Transfer Taxes imposed on it by Law as aresult of the sale of the Purchased Interests, but, notwithstanding suchrequirement at Law, each of Seller and Buyer shall bear half of the total ofall such Transfer Taxes. Accordingly, if either Party is required at Law to paymore than its half of any such Transfer Taxes, the other Party shall promptlyreimburse such first Party for amounts in excess of such half. Seller and Buyershall timely file their own Transfer Tax Returns as required by Law and shallnotify the other Party

 

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when suchfilings have been made. Seller and Buyer shall cooperate and consult with eachother prior to filing such Transfer Tax Returns to ensure that all such returnsare filed in a consistent manner. Seller’s Transfer Tax obligation under this Section 6.12is limited to those Transfer Taxes arising from Buyer’s purchase of thePurchased Interests and any actions occurring prior to the Closing, and Buyeris solely responsible for any Transfer Taxes arising from any action todissolve, terminate or restructure either Company or to convey, distribute ortransfer any assets, properties or other rights by deed, bill of sale orotherwise to or from either Company after the Closing.

                6.13        Transition Services Arrangements. The applicable parties shallenter into the Transition Services Agreement at Closing to be deliveredpursuant to Section 2.5. For purposes of clarification, any payments forservices provided under the Services Agreement with respect to the CG&ETransactions shall be governed by the Services Agreement rather than theTransition Services Agreement.

                6.14        Tax Matters.

(a)           Section 338(h)(10) Election.  Seller and Buyer shall (i) join inmaking an election under Section 338(h)(10) of the Code (and anyelection corresponding to Section 338(h)(10) of the Code underforeign, state or local laws) with respect to the purchase of CMT (the “Section 338(h)(10) Election”);(ii) provide to the other party the necessary information to permit the Section 338(h)(10) Electionto be made; and (iii) take all actions necessary and appropriate(including filing any necessary forms, returns, elections, schedules and otherdocuments) as may be required to effect and preserve timely the Section 338(h)(10) Electionin accordance with the provisions of Treasury Regulation Section 1.338(h)(10)-1(or any provisions comparable to Section 338(h)(10) of state or localTax law). The “aggregate deemed sales price” (as defined in Treasury RegulationSection 1.338-4) (the “ADSP”) andthe “adjusted gross-up basis” (as defined in Treasury Regulation Section 1.338-5)(the “AGUB”) shall be allocated among theassets of CMT in accordance with Treasury Regulation Section 1.338-6and Treasury Regulation Section 1.338-7. Buyer shall determine theADSP and deliver to Seller an allocation of the ADSP among the assets of CMTwithin ninety (90) days after the Closing Date (the “AllocationSchedule”). If within thirty (30) days of receipt of theAllocation Schedule, Seller notifies Buyer in writing that Seller objects toone or more items reflected on the Allocation Schedule, Seller and Buyer shallnegotiate in good faith to resolve such dispute. If Seller and Buyer fail toresolve any such dispute within thirty (30) days after Buyer’s receipt ofSeller’s notice, the parties shall submit the dispute for resolution to theIndependent Accountant, and the Independent Accountant’s resolution of thedispute shall be final and binding on both parties and shall be deemed to amendthe Allocation Schedule. Seller and Buyer shall file Internal Revenue Service Form 8023and Form 8883 and any other state, local and foreign forms required forthe Section 338(h)(l0) Election in accordance with the Allocation Schedule.The parties agree not to take any position inconsistent with the AllocationSchedule for Tax reporting purposes. In the event the Allocation Schedule isdisputed by any Taxing Authority, the Party receiving notice of the disputeshall promptly notify the other Party hereto concerning such dispute.

(b)           Consolidated Returns.  Seller shall cause to be included in theconsolidated federal income Tax Return (and in the state income Tax Returns ofany state in

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whichconsolidated, combined or unitary income Tax Returns are filed) of the SellerGroup for any Pre-Closing Tax Period, all items of income, gain, loss,deduction and credit of CMT that are required to be included therein, shallcause such Tax Returns to be timely filed with the appropriate TaxingAuthorities, and shall be responsible for the timely payment of and indemnifythe Buyer Indemnified Parties against, and shall be entitled to all refunds orcredits of, all Taxes (except for Taxes resulting from any transactionoccurring on the Closing Date after the Closing) due with respect to theperiods covered by such Tax Returns (including any such Taxes resulting fromthe Section 338(h)(10) Election). To the extent permitted by law oradministrative practice, (i) the taxable year of CMT that includes theClosing Date shall be treated as closing on (and including) the Closing Dateand (ii) all transactions occurring on the Closing Date but after theClosing shall have occurred shall be reported on the Tax Returns for thesucceeding taxable year. At or prior to the Closing, Seller shall have theright to cause CMT to pay to Seller or members of the Seller Group an amountequal to Seller’s estimate of all Taxes due by CMT with respect to the TaxReturns described in this Section 6.14(b); provided that any payment madepursuant to this last sentence of Section 6.14(b) shall beappropriately reflected in calculating Net Working Capital.

(c)           Preparation of Other Tax Returns.With respect to any Tax Return (other than a Tax Return described in paragraph (b) above)covering a Pre-Closing Tax Period that is required to be filed after theClosing Date with respect to a Company, (i) Seller shall cause such TaxReturn to be prepared and shall deliver such Tax Return as so prepared to Buyerat least fifteen (15) days prior to the due date (including extensions) forfiling such Tax Return, and (ii) Buyer shall cause such Tax Return to beexecuted and duly and timely filed with the appropriate Taxing Authority andshall pay or cause to be paid all Taxes shown as due on such Tax Return. Withrespect to any Tax Return covering a Straddle Period that is required to befiled after the Closing Date with respect to a Company, (i) Buyer shallcause such Tax Return to be prepared (in a manner consistent with practicesfollowed in prior taxable periods except as required by a change in Law orfact) and shall deliver a draft of such Tax Return to Seller for Seller’sreview and approval at least thirty (30) days prior to the due date (includingextensions) for filing such Tax Return, (ii) Seller and Buyer shallcooperate and consult with each other in order to finalize such Tax Return, and(iii) thereafter Buyer shall cause such Tax Return to be executed and dulyand timely filed with the appropriate Taxing Authority and shall pay or causeto be paid all Taxes shown as due on such Tax Return.

(d)           Liability for Taxes. Sellershall be responsible for and indemnify Buyer and the Companies against, andSeller shall be entitled to all refunds and credits of, (i) any Tax withrespect to a Company that is attributable to a Pre-Closing Tax Period or tothat portion of a Straddle Period that ends on the Closing Date (including anyTax resulting from any audit or proceeding that closes or concludes followingthe Closing Date, even where such audit or proceeding was disclosed to Sellerin Section 4.8 or on Schedule 4.8), but only to the extent that theaggregate amount of such Taxes exceeds the amounts reflected as a currentliability (and, in the case of CCI, the current and deferred liability) forTaxes in the computation of Net Working Capital, and (ii) any liability ofa Company under Treas. Reg. §1.1502-6 (or any similar provision understate, local or foreign law) for Taxes attributable to any Pre-Closing TaxPeriod or to that portion of a Straddle Period that ends on the Closing Date. Withrespect to a Straddle Period, Seller and Buyer shall determine the Taxattributable to the portion of the Straddle Period that ends on the ClosingDate by an interim closing of the books of the Company as of the

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ClosingDate, except for ad valorem or property Taxes and franchise Taxes based solelyon capital which shall be prorated on a daily basis to the Closing Date. Buyershall be responsible for and indemnify Seller against, and Buyer shall beentitled to all refunds and credits of (such entitlement being subject to thefollowing sentence), all other Taxes with respect to the Companies. If afterthe Closing (i) Buyer or a Company receives a refund or utilizes a creditof any Tax with respect to a Company that is attributable to a Pre-Closing TaxPeriod or to that portion of a Straddle Period ending on the Closing Date or (ii) theamount of any Tax paid with respect to a Company is less than the amountreflected as a current liability (and, in the case of CCI, the current anddeferred liability) for such Tax in the computation of Net Working Capital,Buyer shall pay to Seller within ten (10) days after such receipt,utilization or reduction an amount equal to such refund, credit or reduction,together with any interest received or credited thereon.

(e)           Access to Records.  Seller shall grant to Buyer (or its designees)access at all reasonable times to all of the information, books and recordsrelating to the Companies within the possession of Seller (including workpapersand correspondence with Taxing Authorities), and shall afford Buyer (or itsdesignees) the right (at Buyer’s expense) to take extracts therefrom and tomake copies thereof, to the extent reasonably necessary to permit Buyer (or itsdesignees) to prepare Tax Returns, respond to Tax audits and investigations,prosecute Tax protests, appeals and refund claims and to conduct negotiationswith Taxing Authorities. Buyer shall grant or cause the Companies to grant toSeller (or its designees) access at all reasonable times to all of theinformation, books and records relating to the Companies within the possessionof Buyer (including workpapers and correspondence with Taxing Authorities) andto the employees of the Companies, and shall afford Seller (or its designees)the right (at Seller’s expense) to take extracts therefrom and to make copiesthereof, in each case to the extent reasonably necessary to permit Seller (orits designees) to prepare Tax Returns, respond to Tax audits andinvestigations, prosecute Tax protests, appeals and refund claims and toconduct negotiations with Taxing Authorities. After the Closing Date, Sellerand Buyer will preserve all information, records or documents in theirrespective possessions relating to liabilities for Taxes of the Companies fortaxable years or portions thereof ending on or before the Closing Date untilsix months after the expiration of any applicable statute of limitations(including extensions thereof) with respect to the assessment of such Taxes;provided, that neither Party shall dispose of any of the foregoing itemswithout first offering such items to the other Party.

(f)            Section 338(g) Election.  Buyer shall make a timely and effectiveelection under section 338(g) of the Code (the “Section 338(g) Election”)with respect to Buyer’s purchase of the CCI shares. To facilitate the Section 338(g) Election,at the Closing Buyer shall deliver to Seller Internal Revenue Service Form 8023with respect to CCI, which Form shall have been duly executed by anauthorized person for Buyer. Buyer and Seller shall cooperate in completingInternal Revenue Service Form 8883 with respect to Buyer’s purchase of theCCI shares, including a determination and an allocation of the ADSP and AGUP inaccordance with Treasury Regulation Sections 1.338-4 through 1.338-7.

(g)           Procedure.  In the case that a Tax claim is made againstthe Buyer or a Company that would, if successful, result in an indemnificationof the Buyer by Seller under

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Section 6.14(d),the procedures set forth in Section 10.6 shall apply but not thelimitation set forth in Sections 10.2(b),(c) and (d).

(h)           Exemption Documentation. Buyerand Seller shall cooperate in obtaining all necessary sales and use Taxexemption documentation in respect of the transactions that are the subject ofthe agreements attached hereto as Exhibit E and Exhibit F.

                6.15        Affiliate Contracts. From and after the date hereof,Buyer and Seller shall use commercially reasonable efforts to obtain thewritten consent from each Counterparty to each Affiliate Contract that is not aTerminated Contract to the assignment and assumption or novation of suchAffiliate Contract by each Assignor to a Company, provided, however, that thefailure to obtain such consent shall not delay or prevent Closing, and anyobligation to seek such consent by Buyer or Seller shall terminate within one hundred eighty (180) days after theClosing. Without limiting the foregoing, Buyer’s efforts shall include offeringto replace any credit support posted or maintained by Seller or a Non-CompanyAffiliate in favor of any Counterparty to any Affiliate Contract in accordancewith the requirements of Section 6.7, and in the case of AffiliateContracts with respect to which none of Seller or any Non-Company Affiliate hasposted or maintains any credit support or where the Counterparty requests adifferent amount or type of credit support than is currently being provided,Buyer shall comply with all commercially reasonable requests from anyCounterparty under such Affiliate Contracts to post or maintain credit supportas security for the performance of the obligations of the Assignee thereof.

                6.16        Further Assurances. Subject to the terms andconditions of this Agreement, at any time or from time to time after theClosing, at either Party’s request and without further consideration, the otherParty shall execute and deliver to such Party such other instruments of sale,transfer, conveyance, assignment and confirmation, provide such materials andinformation and take such other actions as such Party may reasonably request inorder to consummate the transactions contemplated by this Agreement.

                6.17        Periodic Reports. During the Interim Period,Seller will cause each Company to promptly provide to Buyer copies of the DailyOperating Reports with respect to the Companies (including the CG&ETransactions) prepared in the ordinary course of business; provided that Sellershall have the right to redact such Daily Operating Reports as may be needed tocomply with Law or applicable confidentiality restrictions.

ARTICLEVII
BUYER’S CONDITIONS TO CLOSING

The obligationof Buyer to consummate the Closing is subject to the fulfillment of each of thefollowing conditions (except to the extent waived in writing by Buyer in itssole discretion):

                7.1          Representations and Warranties. The representations andwarranties made by Seller in ARTICLE III and ARTICLE IV shall be true at theClosing, except for any failures of

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suchrepresentations and warranties to be true that would not reasonably be expectedto result in a Material Adverse Effect.

                7.2          Performance. Seller shall have performed and complied (or caused theCompanies, CG&E or any applicable Non-Company Affiliate to perform orcomply) with the agreements, covenants and obligations required by thisAgreement to be so performed or complied with by Seller at or before theClosing, except for any such failure to perform or comply that would not reasonablybe expected to result in a Material Adverse Effect.

                7.3          Officer’sCertificate. Sellershall have delivered to Buyer at the Closing a certificate of an officer ofSeller, dated as of the Closing Date, as to the matters set forth in Sections7.1 and 7.2.

                7.4          Orders and Laws. There shall not be anyProceeding (filed by a Person other than Buyer or its Affiliates) or Law ororder restraining, enjoining or otherwise prohibiting or making illegal orthreatening to restrain, enjoin or otherwise prohibit or make illegal theconsummation of the transactions contemplated by this Agreement.

                7.5          Buyer Approvals. The Buyer Approvals have beenduly made, given or obtained, and all terminations or expirations of waitingperiods imposed by any Governmental Authority shall have occurred; provided, however, that the absence of any appeals and theexpiration of any appeal period with respect to any of the foregoing shall notconstitute a condition to Closing hereunder.

                7.6          Casualty. The absence of any occurrence on or after the Signing Datebut prior to Closing of any act of God, war or terrorism that results in (a) thedeath or incapacity of a sufficient number of Available Employees and/or (b) damageto a sufficient portion of the Equipment of the Companies that, in the case ofclauses (a) and (b), would result in the Companies being incapable ofconducting their businesses, taken as a whole, as currently conducted for aperiod of more than sixty (60) days from the date of such occurrence.

ARTICLEVIII
SELLER’S CONDITIONS TO CLOSING

The obligationof Seller to consummate the Closing is subject to the fulfillment of each ofthe following conditions (except to the extent waived in writing by Seller inits sole discretion):

                8.1          Representations and Warranties. The representations andwarranties made by Buyer in ARTICLE V shallbe true and correct in all material respects at the Closing.

                8.2          Performance. Buyer shall have performed and complied in all materialrespects with the agreements, covenants and obligations required by thisAgreement to be so performed or complied with by Buyer at or before theClosing.

                8.3          Officer’s Certificate. Buyer shall have delivered toSeller at the Closing a certificate of an officer of Buyer, dated as of theClosing Date, as to the matters set forth in Sections 8.1 and 8.2.

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                8.4          Orders and Laws. There shall not be anyProceeding (filed by a Person other than Seller or its Affiliates) or Law ororder restraining, enjoining or otherwise prohibiting or making illegal orthreatening to restrain, enjoin or otherwise prohibit or make illegal theconsummation of the transactions contemplated by this Agreement.

                8.5          Seller Approvals. The Seller Approvals shall havebeen duly made, given or obtained, and all terminations or expirations ofwaiting periods imposed by any Governmental Authority shall have occurred; provided, however, that the absence of any appeals and theexpiration of any appeal period with respect to any of the foregoing shall notconstitute a condition to Closing hereunder.

ARTICLEIX
TERMINATION

                9.1          Termination. This Agreement may be terminated, and the transactionscontemplated hereby may be abandoned, as follows:

(a)           at any time before the Closing, byeither Party, by written notice from one Party to the other Party if any Law orfinal order restrains, enjoins or otherwise prohibits or makes illegal thetransactions contemplated pursuant to this Agreement;

(b)           at any time before the Closing, byeither Party, by notice from one Party to the other, if such other Party hasmaterially breached its obligations hereunder and such breach (other than abreach of Buyer’s obligation to pay the Purchase Price in accordance with theterms of ARTICLE II, which for purposes of clarification shall have nocure period) has not been cured within thirty (30) days following writtennotification thereof; provided, however, that if, at the end of such thirty(30) day period, the breaching Party is endeavoring in good faith, andproceeding diligently, to cure such breach, then the breaching Party shall havean additional thirty (30) days in which to effect such cure;

(c)           on or after December 15, 2006 if the Closing has not occurred by suchdate, unless the Parties mutually agree in writing (i) to extend theperiod in which such Closing must occur or (ii) to waive or amend theprovisions of this Section 9.1(c);

(d)           at any time before the Closing, bySeller by written notice to Buyer, if authorization of the transactionscontemplated by this Agreement pursuant to Section 203 of the FPA has notbeen granted by FERC on or before September 15, 2006;

(e)           at any time before the Closing, byBuyer or Seller by written noticeto the other Party, if authorization of the transactions contemplated by thisAgreement have not been approved by the Federal Reserve Board on or before onehundred twenty (120) days following the Signing Date; and

(f)            by mutual written consent of theParties.

                9.2          Effect of Termination. If this Agreement is validlyterminated pursuant to Section 9.1, notwithstanding anything in thisAgreement to the contrary, there will be no liability or obligation on the partof Seller or Buyer (or any of their respective Representatives or

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Affiliates), provided that (a) Sections 6.3(b),9.2, 10.5, 11.3, 11.4, and 11.14 will survive any such termination and (b) eachParty shall continue to be liable for any willful and intentional breach ofthis Agreement by it occurring prior to such termination.

ARTICLE X
INDEMNIFICATION, LIMITATIONS OF LIABILITY, WAIVERS AND ARBITRATION

                10.1        Indemnification. (a)  Subject to Section 10.2, from andafter Closing, Seller shall indemnify, defend and hold harmless Buyer, each ofthe Companies, and their respective partners, members, officers, employees,Affiliates and Representatives (collectively, the “Buyer Indemnified Parties”) from andagainst all Losses incurred or suffered by any Buyer Indemnified Party arisingfrom:

(i)                    anybreach or inaccuracy as of the Closing (as though made as of the Closing exceptto the extent otherwise provided in this Agreement) of any representation orwarranty of Seller contained in this Agreement, the Software and IntellectualProperty License Agreement or any certificate delivered pursuant to Section 7.3;

(ii)                   anybreach of any covenant or agreement of Seller contained in this Agreement orthe Software and Intellectual Property License Agreement;

(iii)                  theAssigned Contracts and the CG&E Transactions to the extent due to actionsor omissions prior to Closing and not included in the calculation of NetWorking Capital;

(iv)                  anytermination by Kerr-McGee Oil & Gas Corporation, Kerr-McGee Oil &Gas Onshore LP and Oryx Gas Marketing Limited Partnership (collectively, the “Kerr-McGee Parties”)under Section 9.1 of the Amended and Restated Gas Purchase Agreement,dated as of July 1, 1998, between the Kerr-McGee Parties and CMT, asamended prior to the date hereof, to the extent such termination results solelyfrom the sale of the Capital Stock of CMT pursuant to this Agreement; providedthat in no event shall the Losses under this clause (iv) exceed the differencebetween (A) the portion of the MTM Value of the Trading Book allocated tosuch Amended and Restated Gas Purchase Agreement as of Closing minus (B) thetermination payment payable pursuant to such Section 9.1;

(v)                   theExcluded Items;

(vi)                  withrespect to any Third Party Software that Seller fails to transfer to (or obtainon behalf of) CMT prior to the Closing Date pursuant to Section 6.5hereof, (A) any claim of infringement or misappropriation based on the useby CMT after the Closing, in a manner consistent with CMT’s use prior to theClosing, of such Third Party Software, but such indemnity shall apply only toany such use that occurs prior to the earlier of (1) the 90th dayfollowing the Closing Date and (2) the date on which Seller transfers to (orobtains on behalf of) CMT such Third Party Software and (B) the reasonablecost of obtaining a license to such Third Party Software pursuant to Section 6.5;

 

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(vii)                 theProceedings identified as item 1 on Schedule 4.4; and

(viii)                anyCG&E Transaction that is an “Into Cinergy Seller’s Choice” Contract to theextent that (A) CMT (or CMT on behalf of CG&E) has received deliveryof physical power at a location within the “Into Cinergy” control area otherthan “CinHub” from a Counterparty under another “Into Cinergy Seller’s Choice”Contract and (B) CMT (or CMT on behalf of CG&E) does not have another “IntoCinergy Seller’s Choice” Contract that would permit CMT (or CMT on behalf ofCG&E) to deliver physical power to the location in the “Into Cinergy”control area other than “CinHub” at which CMT (or CMT on behalf of CG&E)has received such delivery (and for purposes of this Section 10.1(a)(viii),the “Losses” incurred or suffered by the Buyer Indemnified Parties shall becalculated as the excess, if any, of the amount paid by CMT for the applicablephysical power delivered to it at such location and the price received by CMTfrom the sale of such physical power in accordance with the terms hereof).

(b)           Subject to Section 10.2, fromand after Closing, Buyer shall indemnify, defend and hold Seller and itspartners, members, officers, employees, Affiliates and Representatives(collectively, the “SellerIndemnified Parties” and, together with Buyer IndemnifiedParties, the “IndemnifiedParties”) harmless from and against all Losses incurred orsuffered by any Seller Indemnified Party arising from:

(i)                    anybreach or inaccuracy as of the Closing (as though made as of the Closing exceptto the extent otherwise provided in this Agreement) of any representation orwarranty of Buyer contained in this Agreement, the Software and IntellectualProperty License Agreement or any certificate delivered pursuant to Section 8.3;

(ii)                   anybreach of any covenant or agreement of Buyer contained in this Agreement or theSoftware and Intellectual Property License Agreement;

(iii)                  theAssigned Contracts and the CG&E Transactions to the extent due to actionsor omissions from or after Closing;

(iv)                  theClosing Date Transactions (other than the CG&E Transactions and other thanany Tax liability resulting from such transactions); and

(v)                   theContinuing Support Obligations.

                10.2        Limitations of Liability. Notwithstanding anything in thisAgreement to the contrary:

(a)           the representations, warranties,covenants, agreements and obligations in this Agreement shall survive theClosing, provided however that noParty may make or bring any Claim for liability with respect to (i) anyrepresentation or warranty contained in this Agreement or the Software andIntellectual Property License Agreement (other than those representations andwarranties contained in Sections 3.1 (Organization), 3.2 (Authority), 3.4(Capitalization), 4.1 (Organization), 4.3 (Capitalization), 5.1 (Organization)and 5.2 (Authority) (collectively,the “Title and AuthorityRepresentations”)) or any covenants in Section 6.4, afterthe 18-month anniversary of the Closing Date, (ii) the Title andAuthority Representations, after the five-year

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anniversaryof the Closing Date, (iii) the representation and warranty contained in Section 4.6after the 180th day following the Closing Date, and (iv) therepresentations and warranties contained in Section 4.8 (Taxes) and thecovenants in Section 6.14 after the expiration of sixty (60) daysfollowing the expiration of the applicable statute of limitations (includingextensions thereof consented to in writing by Seller, such consent not to beunreasonably withheld) and (iv) any covenants, agreements or obligationsof the Parties that by their terms are to be performed prior to Closing (otherthan those contained in Sections 6.3(b), the last sentence of Section 6.3(c),and Sections 6.4, 6.6, 6.10 and 6.11(a)), after the Closing;

(b)           any breach of a representationor warranty in this Agreement or the Intellectual Property License Agreement inconnection with any single item or group of related items that results inLosses of less than $150,000 shall be deemed, for purposes of this Article X,not to be a breach of such representation or warranty; provided, however, thatfor the purposes of this Section 10.2(b), any group of related items thatresults in Losses of $150,000 or more shall not be “disaggregated” so that anyindividual items comprising any portion or portions of such group of relateditems is less than $150,000;

(c)           Seller shall have no liability forbreaches of representations, warranties and covenants in this Agreement or theSoftware and Intellectual Property License Agreement until the aggregate amountof all Losses incurred by Buyer equals or exceeds $4,000,000 (the “Deductible Amount”), in which eventSeller shall be obligated to indemnify the Buyer Indemnified Parties from andagainst all such Losses (including those less than the Deductible Amount) inaccordance with this Article X, but subject to the other limitations setforth in this Article X;

(d)           in no event shall Seller’s aggregateliability (i) arising out of or relating to this Agreement or the Softwareand Intellectual Property License Agreement, taken as a whole, whether relatingto breach of representation and warranty, covenant, agreement or obligation inthis Agreement or the Software and Intellectual Property License Agreement andwhether based on contract, tort, strict liability, other Laws or otherwise,exceed 20% of the Base Purchase Price, except as set forth in Section 10.2(d)(ii) orSection 10.2(i); and (ii) arising out of or relating to any breach ofa Title or Authority Representation (together with the aggregate liability pursuantto Section 10.2(d)(i)) exceed 100% of the Base Purchase Price;

(e)           Neither Party shall have anyliability for any breach of a representation, warranty, covenant, agreement orobligation in this Agreement or the Software and Intellectual Property LicenseAgreement by such Party (i) of which the other Party had Knowledge priorto the date of this Agreement or (ii) (x) of which the other Partyhad Knowledge on or prior to the Closing Date and (y) in the case of thisAgreement where due to such breach such other Party’s conditions to closing in Article VIIor Article VIII, as applicable, were not met;

(f)            no matter shall be the subject ofany Claim hereunder or under the Software and Intellectual Property LicenseAgreement to the extent the Party bringing such Claim has otherwise beencompensated therefore, whether through calculation of the Purchase Price, NetWorking Capital, or MTM Value of the Trading Book, through the presence ofaccruals or reserves or otherwise;

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(g)           a Party must give written notice tothe other Party within a reasonable period of time after becoming aware of anymaterial breach by such other Party of any representation, warranty, covenant,agreement or obligation in this Agreement or the Software and IntellectualProperty License Agreement;

(h)           the Parties shall have a duty tomitigate any Loss in connection with this Agreement or the Software andIntellectual Property License Agreement;

(i)            the limitations set forth in Section 10.2(b),(c) and (d) shall not apply to Seller’s indemnification obligationspursuant to (i) Section 10.1(a)(ii) solely to the extentrelating to Section 6.7(i) or Section 6.9(d), (f), (g), (h), (m) or(n), or (ii) Section 10.1(a)(iii) through (viii).

(j)            Seller shall have no liability forany Losses for repairs, replacements or improvements which enhance the value ofthe repaired, replaced or improved asset above the value of such asset at theClosing if such asset had not been damaged or otherwise impaired or whichexceed the lowest reasonable cost of repair or replacement.

                10.3        Indirect Claims. From and after the Closing, Buyer agrees to release,indemnify and hold harmless Seller, its Affiliates and the officers, directorsand employees of the Companies (acting in their capacity as such) from andagainst any Claims for controlling stockholder liability or breach of anyfiduciary duty relating to any pre-Closing actions or failures to act(including negligence or gross negligence) by Seller or any of its Affiliatesin connection with the business of the Companies prior to the Closing.

                10.4        Waiver of Other Representations. (a)  NOTWITHSTANDINGANYTHING IN THIS AGREEMENT TO THE CONTRARY, IT IS THE EXPLICIT INTENT OF EACHPARTY, AND THE PARTIES HEREBY AGREE, THAT NONE OF SELLER OR ANY OF ITSAFFILIATES OR REPRESENTATIVES HAS MADE OR IS MAKING ANY REPRESENTATION ORWARRANTY WHATSOEVER, EXPRESS OR IMPLIED, WRITTEN OR ORAL, INCLUDING ANY IMPLIEDREPRESENTATION OR WARRANTY AS TO THE CONDITION, MERCHANTABILITY, USAGE,SUITABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE WITH RESPECT TO THECOMPANIES, THE PURCHASED INTERESTS OR ANY OF THE COMPANIES’ ASSETS, OR ANY PART THEREOF,EXCEPT THOSE REPRESENTATIONS AND WARRANTIES CONTAINED IN ARTICLES III AND IV. INPARTICULAR, AND WITHOUT IN ANY WAY LIMITING THE FOREGOING, SELLER AND ITSAFFILIATES MAKES NO REPRESENTATION OR WARRANTY TO BUYER WITH RESPECT TO ANYFINANCIAL PROJECTIONS OR FORECASTS RELATING TO THE COMPANIES, THE PURCHASEDINTERESTS OR ANY OF THE COMPANIES’ ASSETS, OR ANY PART THEREOF.

(b)           EXCEPT AS OTHERWISE EXPRESSLYPROVIDED IN THE REPRESENTATIONS AND WARRANTIES IN ARTICLES III AND IV, SELLER’SAND THE PARENT COMPANIES’ INTERESTS IN THE COMPANIES ARE BEING TRANSFERRED “ASIS, WHERE IS, WITH ALL FAULTS,” AND SELLER EXPRESSLY DISCLAIMS ON BEHALF OFITSELF AND ITS AFFILIATES ANY REPRESENTATIONS OR WARRANTIES OF ANY KIND ORNATURE, EXPRESS OR IMPLIED, AS TO THE

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CONDITION,VALUE OR QUALITY OF THE COMPANIES, THE PURCHASED INTERESTS OR ANY OF THECOMPANIES’ ASSETS, OR ANY PART THEREOF OR THE PROSPECTS (FINANCIAL OROTHERWISE), RISKS AND OTHER INCIDENTS OF THE COMPANIES, THE PURCHASED INTERESTSOR ANY OF THE COMPANIES’ ASSETS, OR ANY PART THEREOF.

                10.5        Waiver of Remedies. (a)  The Parties herebyagree that neither Party shall have any liability, and neither Party shall makeany Claim, for any Loss or other matter, under, relating to or arising out ofthis Agreement or the Software and Intellectual Property License Agreement orany other document, agreement, certificate or other matter delivered pursuanthereto, whether based on contract, tort, strict liability, other Laws orotherwise, except as provided in Articles IX and X.

(b)           NOTWITHSTANDING ANYTHING IN THISAGREEMENT OR THE SOFTWARE AND INTELLECTUAL PROPERTY LICENSE AGREEMENT TO THECONTRARY, NO PARTY SHALL BE LIABLE FOR SPECIAL, PUNITIVE, EXEMPLARY,INCIDENTAL, CONSEQUENTIAL OR INDIRECT DAMAGES OR LOST PROFITS, WHETHER BASED ONCONTRACT, TORT, STRICT LIABILITY, OTHER LAW OR OTHERWISE AND WHETHER OR NOTARISING FROM THE OTHER PARTY’S SOLE, JOINT OR CONCURRENT NEGLIGENCE, STRICTLIABILITY OR OTHER FAULT (“Non-reimbursable Damages”).

(c)           Notwithstanding anything in thisAgreement or the Software and Intellectual Property License Agreement to thecontrary, no Representative or Affiliate of a Party shall have any liability toanother Party or any other Person as a result of the breach of anyrepresentation, warranty, covenant, agreement or obligation of such Party inthis Agreement or the Software and Intellectual Property License Agreement.

                10.6        Procedure with Respect to Third-Party Claims. (a)  If any Party (or as toBuyer after Closing, either Company) becomes subject to a pending or threatenedClaim of a third party and such Party (the “Claiming Party”) believes it has a claimagainst the other Party (the “Responding Party”) as a result, then the Claiming Partyshall notify the Responding Party in writing of the basis for such Claimsetting forth the nature of the Claim in reasonable detail. The failure of theClaiming Party to so notify the Responding Party shall not relieve theResponding Party of liability hereunder except to the extent that the defenseof such Claim is prejudiced by the failure to give such notice.

(b)           If any Proceeding is brought by athird party against a Claiming Party and the Claiming Party gives notice to theResponding Party pursuant to Section 10.6,the Responding Party shall be entitled to participate in such proceeding and,to the extent that it wishes, to assume the defense of such proceeding, if (i) theResponding Party provides written notice to the Claiming Party that theResponding Party intends to undertake such defense, (ii) the RespondingParty conducts the defense of the third-party Claim actively and diligentlywith counsel reasonably satisfactory to the Claiming Party and (iii) ifthe Responding Party is a party to the proceeding, the Responding Party or theClaiming Party has not determined in good faith that joint representation wouldbe inappropriate because of a conflict in interest. The Claiming Party shall,in its sole discretion, have the right to employ separate counsel (who may beselected

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bythe Claiming Party in its sole discretion) in any such action and toparticipate in the defense thereof, and the fees and expenses of such counselshall be paid by such Claiming Party. The Claiming Party shall fully cooperatewith the Responding Party and its counsel in the defense or compromise of suchClaim. If the Responding Party assumes the defense of a proceeding, nocompromise or settlement of such Claims may be effected by the Responding Partywithout the Claiming Party’s consent unless (A) there is no finding oradmission of any violation of Law or any violation of the rights of any Personand no effect on any other Claims that may be made against the Claiming Partyand (B) the sole relief provided is monetary damages that are paid in fullby the Responding Party.

(c)           If (i) notice is given to theResponding Party of the commencement of any third-party legal proceeding andthe Responding Party does not, within thirty (30) days after the Claiming Party’snotice is given, give notice to the Claiming Party of its election to assumethe defense of such legal proceeding, (ii) any of the conditions set forthin clauses (i) through (iii) of Section 10.6(b) above become unsatisfied or (iii) aClaiming Party determines in good faith that there is a reasonable probabilitythat a legal proceeding may adversely affect it other than as a result ofmonetary damages for which it would be entitled to indemnification from theResponding Party under this Agreement or the Software and Intellectual PropertyLicense Agreement, then the Claiming Party shall (upon notice to the RespondingParty) have the right to undertake the defense, compromise or settlement ofsuch claim; provided, however, thatthe Responding Party shall reimburse the Claiming Party for the costs ofdefending against such third-party claim (including reasonable attorneys’ feesand expenses) and shall remain otherwise responsible for any liability withrespect to amounts arising from or related to such third-party claim, in bothcases to the extent it is ultimately determined that such Responding Party isliable with respect to such third-party claim for a breach under this Agreement.The Responding Party may elect to participate in such legal proceedings,negotiations or defense at any time at its own expense.

(d)           For purposes of this Section 10.6,Seller shall be deemed to have assumed the defense of the Claim described in Section 10.1(a)(vii).

                10.7        Tax Treatment of Indemnity Payment. Any payment made pursuant tothis Article X or Section 6.14(d) shall be treated as anadjustment to the Purchase Price.

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ARTICLEXI
MISCELLANEOUS

                11.1        Notices. (a) Unless this Agreement specifically requiresotherwise, any notice, demand or request provided for in this Agreement, orserved, given or made in connection with it, shall be in writing and shall bedeemed properly served, given or made if delivered in person or sent byfacsimile or sent by registered or certified mail, postage prepaid, or by a nationallyrecognized overnight courier service that provides a receipt of delivery, ineach case, to the Parties at the addresses specified below:

If to Buyer,to:

Fortis BankS.A./N.V.
c/o Fortis Capital Corporation
153 East 53rd Street, 27th floor
New York, New York 10022


Facsimile No.:  (212)340-6170
Attn:  Executive Vice President/GeneralCounsel

If to Seller,to:

Cinergy Capital &Trading, Inc.,
c/o Duke Energy Americas
5400 Westheimer Court
Houston, Texas 77056-5310
Attn:  Chief Financial Officer
Facsimile No.:  (713)627-6012




with a copy to:

Duke EnergyCorporation
400 South Tryon Street, Suite 1800
Charlotte, NC  28202
Facsimile No.:
Attn: Vice President and General Counsel – Corporate Legal Group



(b)          Notice given by personal delivery, mail or overnight courier pursuant to this Section 11.1shall be effective upon physical receipt. Notice given by facsimile pursuant tothis Section 11.1 shall be effective as of the date of confirmed delivery if delivered before 5:00 p.m. on anyBusiness Day at the place of receipt or the next succeeding Business Day ifconfirmed delivery is after 5:00 p.m. on any Business Day at the place ofreceipt or during any non-Business Day at the place of receipt.

                11.2        Entire Agreement. Except for the ConfidentialityAgreement,this Agreement together with the Schedules and the Ancillary Agreementssupersedes all prior discussions and agreements between the Parties and theirrespective Affiliates with respect to the subject matter hereof and containsthe sole and entire agreement among the Parties and their respective Affiliateswith respect to the subject matter hereof. No representations, warranties,covenants, understandings, agreements, oral or otherwise, relating to thetransactions contemplated by this Agreement exist between Buyer and itsAffiliates, on the one hand, and Seller and its Affiliates, on the other hand,or any of their respective Affiliates, except as expressly set forth in thisAgreement or the Ancillary Agreements. Nothing in any of the AncillaryAgreements shall be deemed to alter, amend or otherwise modify any obligationof Seller or Buyer under this Agreement. In the event of any conflict betweenthe terms of any Ancillary Agreement and the terms of this Agreement, the termsof this Agreement shall control.

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                11.3        Expenses. Except as otherwise expressly provided in this Agreement,whether or not the transactions contemplated hereby are consummated, each Partywill pay its own costs and expenses incurred in anticipation of, relating toand in connection with the negotiation and execution of this Agreement and thetransactions contemplated hereby.

                11.4        Disclosure. Seller may, at its option, include in information deliveredpursuant to Section 2.3(e) or the Schedules items that are notmaterial in order to avoid any misunderstanding, and any such inclusion, or anyreferences to dollar amounts, shall not be deemed to be an acknowledgment orrepresentation that such items are material, to establish any standard ofmateriality or to define further the meaning of such terms for purposes of thisAgreement. Information disclosed in any information delivered pursuant to Section 2.3(e) orin any Schedule shall constitute a disclosure for purposes of all otherSchedules notwithstanding the lack of specific cross-reference thereto.

                11.5        Waiver. Any term or condition of this Agreement may be waived at anytime by the Party that is entitled to the benefit thereof, but no such waivershall be effective unless set forth in a written instrument duly executed by oron behalf of the Party waiving such term or condition. No waiver by eitherParty of any term or condition of this Agreement, in any one or more instances,shall be deemed to be or construed as a waiver of the same or any other term orcondition of this Agreement on any future occasion.

                11.6        Amendment. This Agreement may be amended or supplemented only by awritten instrument duly executed by or on behalf of each Party.

                11.7        No Third Party Beneficiary. Except for the provisions ofSections 6.1, 6.3(b) and (c), 6.7(d), the fourth sentence of Section 6.9(b),Sections 6.9(k), 6.14(d), 10.1(a) and (b) and 10.3 (which areintended for the benefit of the Persons identified therein), the terms andprovisions of this Agreement are intended solely for the benefit of the Partiesand their respective successors or permitted assigns, and it is not theintention of the Parties to confer third-party beneficiary rights upon anyother Person, including, any employee of the Company, any beneficiary ordependents thereof, or any collective bargaining representative thereof.

                11.8        Assignment; Binding Effect. Neither this Agreement nor anyright, interest or obligation hereunder may be assigned by either Party withoutthe prior written consent of the other Party, and any attempt to do so will bevoid, except for assignments and transfers by operation of Law except thateither Seller or Buyer shall be entitled to assign this Agreement or any partthereof to one or more of its Affiliates (which assignment shall not, withoutthe consent of the other Party, release the assigning Party from itsobligations hereunder). Subject to this Section 11.8, this Agreement isbinding upon, inures to the benefit of and is enforceable by the Parties andtheir respective successors and permitted assigns.

                11.9        Headings. The headings used in this Agreement have been inserted forconvenience of reference only and do not define or limit the provisions hereof.

                11.10      Invalid Provisions. If any provision of thisAgreement is held to be illegal, invalid or unenforceable under any present orfuture Law, and if the rights or obligations of any Party under this Agreementwill not be materially and adversely affected thereby, such provision

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will be fullyseverable, this Agreement will be construed and enforced as if such illegal,invalid or unenforceable provision had never comprised a part hereof, theremaining provisions of this Agreement will remain in full force and effect andwill not be affected by the illegal, invalid or unenforceable provision or byits severance herefrom and in lieu of such illegal, invalid or unenforceableprovision, there will be added automatically as a part of this Agreement alegal, valid and enforceable provision as similar in terms to such illegal,invalid or unenforceable provision as may be possible.

                11.11      Acknowledgment by Buyer. Buyer has not relied on anyrepresentation or warranty from Seller or any of its Affiliates except asexpressly set forth in this Agreement.

                11.12      Publicity. The Parties agree to cooperate and consult with each otherwith respect to press releases or other public communications relating to thetransactions contemplated by this Agreement, and the method of the release forpublication thereof; provided, however,that nothing herein shall affect or otherwise limit either Party frompublishing such press releases or other public communications as such Partyreasonably considers necessary in order to satisfy such Party’s obligations atLaw or under the rules of any stock or commodities exchange.

                11.13      Counterparts; Facsimile. This Agreement may be executedin any number of counterparts, each of which will be deemed an original, butall of which together will constitute one and the same instrument. Anyfacsimile copies hereof or signature hereon shall, for all purposes, be deemedoriginals.

                11.14      Governing Law; Venue; and Jurisdiction. (a) This Agreement shall begoverned by and construed in accordance with the Laws of the State of New York,without giving effect to any conflict or choice of law provision that wouldresult in the imposition of another jurisdiction’s Law.

(b)           WITH RESPECT TO THE ENFORCEMENT OFTHIS AGREEMENT, (i) THE PARTIES HEREBY IRREVOCABLY SUBMIT TO THEJURISDICTION OF FEDERAL COURT IN THE SOUTHERN DISTRICT OF NEW YORK AND (ii) EACHPARTY HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT IT MAY HAVETO A TRIAL BY JURY.

                11.15      Attorneys’ Fees. If either of the Parties shall bring an action to enforcethe provisions of this Agreement, the prevailing Party shall be entitled torecover its reasonable attorneys’ fees and expenses incurred in such actionfrom the unsuccessful Party.

[signature page follows]

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IN WITNESSWHEREOF, this Agreement has been duly executed and delivered by the dulyauthorized officer of each Party as of the date first above written.

SELLER

 

 

 

 

CINERGY CAPITAL & TRADING, INC.

 

 

 

 

By:

/s/ Paul H. Barry

 

Name:

Paul H. Barry

 

Title:

President and Chief Executive Officer

 

 

SIGNATURE PAGE
PURCHASE AGREEMENT



 

BUYER

 

 

 

FORTIS BANK S.A./N.V.

 

 

 

By:

/s/ Filip Dierckx

 

Name:

Filip Dierckx

 

Title:

Managing Director

 

SIGNATURE PAGE
PURCHASE AGREEMENT